<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
CTG RESOURCES, INC.
(Name of Issuer)
THE ENERGY NETWORK, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class of Securities)
125957100
(CUSIP Number of Class of Securities)
JAMES P. BOLDUC
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE ENERGY NETWORK, INC.
100 COLUMBUS BOULEVARD
HARTFORD, CT 06103
(860) 727-3000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications
on Behalf of the Person(s) Filing Statement)
OCTOBER 2, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
- --------------------------------------------------------------------------------------------
$48,600,000 $9,720
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
* Calculated solely for purposes of determining the filing fee in accordance
with Section 13(e)(3) of the Securities Exchange Act of 1934, as amended,
and Rule 0-11 thereunder. This amount assumes the purchase of 1,800,000
shares at the maximum tender offer price per share of $27.00.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is CTG
Resources, Inc., a Connecticut corporation ("CTG"). The address of CTG's
principal executive office is 100 Columbus Boulevard, Hartford, Connecticut
06103.
(b) This Schedule 13E-4 relates to the offer by The Energy Network, Inc.
("TEN"), a Connecticut corporation and a wholly owned subsidiary of CTG, to
purchase up to 1,800,000 shares (or such lesser number of shares as are properly
tendered) of CTG's Common Stock, without par value (the "Shares"), 10,663,641 of
which Shares were outstanding as of September 29, 1997, at prices not in excess
of $27.00 or less than $23.50 net per Share in cash upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated October 2, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and
(a)(2), respectively, hereto and incorporated herein by reference. Officers,
directors and affiliates of CTG and TEN may participate in the Offer on the same
basis as CTG's other shareholders, although CTG and TEN have been advised that
no director or officer of CTG, TEN or any of their subsidiaries intends to
tender any shares pursuant to the Offer. The information set forth in
"Introduction," Section 1, "Number of Shares; Proration," Section 5, "Acceptance
for Payment of Shares and Payment of Purchase Price," Section 12, "Effects of
the Offer on the Market for Shares; Registration Under the Exchange Act" and
Section 15, "Extension of Tender Period; Termination; Amendments" of the Offer
to Purchase is incorporated herein by reference.
(c) The information set forth in "Introduction" and Section 7, "Price Range
of Shares; Dividends" of the Offer to Purchase is incorporated herein by
reference.
(d) This statement is being filed by TEN, a wholly owned subsidiary of CTG.
The address of TEN's principal executive office is 100 Columbus Boulevard,
Hartford, Connecticut 06103.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) - (b) The information set forth in Section 9, "Sources and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF
THE ISSUER OR AFFILIATE.
(a) - (j) The information set forth in "Introduction," Section 8,
"Background and Purpose of the Offer," Section 9, "Sources and Amount of Funds,"
Section 10, "Transactions and Agreements Concerning Shares" and Section 12,
"Effects of the Offer on the Market for Shares; Registration Under the Exchange
Act" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Section 10, "Transactions and Agreements
Concerning Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in "Introduction," Section 8, "Background and
Purpose of the Offer," Section 9, "Sources and Amount of Funds" and Section 10,
"Transactions and Agreements Concerning Shares" of the Offer to Purchase is
incorporated herein by reference.
2
<PAGE>
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and Section 16, "Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) - (b) The information set forth in Section 11, "Financial Information
Concerning CTG" of the Offer to Purchase is incorporated herein by reference.
The financial information set forth in Item 8 of Connecticut Natural Gas
Corporation's Annual Report on Form 10-K for the fiscal year ended September 30,
1996, a copy of which is filed as Exhibit (g)(1) hereto, is incorporated herein
by reference. The financial information set forth on pages 2 through 13 of CTG's
Quarterly Report on Form 10-Q for the period ended June 30, 1997, a copy of
which is filed as Exhibit (g)(2) hereto, is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in Section 13, "Regulatory Approvals" of the
Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 12, "Effects of the Offer on the
Market for Shares; Registration Under the Exhange Act" of the Offer to
Purchase is incorporated herein by reference.
(d) Not applicable.
(e) All of the information set forth in the Offer to Purchase and the
related Letter of Transmittal, copies of which are filed as Exhibit
(a)(1) and (a)(2), respectively, hereto, is incoporated herein by
reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated October 2, 1997.
(2) Form of Letter of Transmittal (including Certification of Taxpayer
Identification Number on Substitute Form W-9).
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(7) Text of Press Release issued by CTG on October 1, 1997.
(8) Form of Summary Advertisement dated October 2, 1997.
(9) Form of Letter to Shareholders of CTG, dated October 2, 1997, from
Victor H. Frauenhofer, Chairman of the Board and Chief Executive
Officer of CTG.
(b)(1) Memorandum of Understanding Relating to Source of Funds.
(2) Form of Three-Year Revolving Credit Agreement between TEN and Fleet
National Bank.
(3) Form of 364-Day Revolving Credit Agreement between TEN and Fleet
National Bank.
3
<PAGE>
(4) Form of Note Purchase Agreement among TEN, Metropolitan Life Insurance
Company and Texas Life Insurance Company.
(c) Forward Equity Purchase Agreement, made as of October 1, 1997, between
CTG and TEN.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Audited Consolidated Financial Statements of the Company as of and
for the years ended September 30, 1996 and 1995 (incorporated by
reference to Item 8 of Connecticut Natural Gas Corporation's Annual
Report on Form 10-K for the year ended September 30, 1996).
(2) Unaudited Consolidated Financial Statements of CTG as of and for the
fiscal quarters ended June 30, 1997 and 1996 (incorporated by
reference to pages 2 through 13 of CTG's Quarterly Report on Form 10-Q
for the period ended June 30, 1997).
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Schedule 13E-4 is true, complete and correct.
<TABLE>
<S> <C> <C>
THE ENERGY NETWORK, INC.
By: /s/ JAMES P. BOLDUC
-----------------------------------------
Name: James P. Bolduc
Title: Executive Vice President
and Chief Financial Officer
</TABLE>
Date: October 2, 1997
5
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 1,800,000 SHARES OF COMMON STOCK, WITHOUT PAR VALUE,
OF CTG RESOURCES, INC.
AT A PURCHASE PRICE NOT GREATER THAN $27.00
OR LESS THAN $23.50 PER SHARE
BY
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY, OCTOBER 30, 1997,
UNLESS THE OFFER IS EXTENDED.
------------------------
The Energy Network, Inc., a Connecticut corporation ("TEN") and a wholly
owned subsidiary of CTG Resources, Inc., a Connecticut corporation ("CTG"),
invites the shareholders of CTG to tender shares of CTG Common Stock, without
par value (the "Shares"), at prices not greater than $27.00 or less than $23.50
per Share, net to the seller in cash, specified by such shareholders, upon the
terms and subject to the conditions set forth herein and in the related Letter
of Transmittal (which together constitute the "Offer"). TEN will determine a
single per Share price (not greater than $27.00 or less than $23.50) (the
"Purchase Price") that it will pay for Shares validly tendered pursuant to the
Offer and not withdrawn, taking into account the number of Shares so tendered
and the prices specified by the tendering shareholders. TEN will select the
Purchase Price that will enable it to purchase 1,800,000 Shares (or such lesser
number of Shares as are validly tendered at prices not greater than $27.00 or
less than $23.50 per Share) pursuant to the Offer. TEN will purchase up to
1,800,000 Shares validly tendered at prices at or below the Purchase Price and
not withdrawn, upon the terms and subject to the conditions of the Offer,
including the provisions thereof relating to proration described herein. Shares
tendered at prices in excess of the Purchase Price and Shares not purchased
because of proration will be returned. Shareholders must complete the section of
the Letter of Transmittal relating to the price at which they are tendering
Shares in order to validly tender Shares.
------------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
------------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of his or her Shares
should either (1) complete and sign the Letter of Transmittal or a photocopy
thereof in accordance with the instructions in the Letter of Transmittal, mail
or deliver it and any other required documents to Chase Mellon Shareholder
Services, L.L.C. (the "Depositary") and either deliver the certificates for
Shares to the Depositary along with the Letter of Transmittal or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 3
hereof or (2) request his or her broker, dealer, commercial bank, trust company
or nominee to effect the transaction for him or her. A shareholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or nominee must contact such broker, dealer, commercial bank, trust company or
nominee if he or she desires to tender such Shares. Any shareholder who desires
to tender Shares and whose certificates for such Shares are not immediately
available, or who cannot comply in a timely manner with the procedure for
book-entry transfer, should tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3 hereof.
------------------------------
NEITHER TEN, CTG NOR ANY OF THEIR SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH
SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT
WHAT PRICE.
TEN HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF TEN, CTG OR ANY OF THEIR
SUBSIDIARIES
INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
------------------------------
As of September 29, 1997, CTG had issued and outstanding 10,663,641 Shares.
The 1,800,000 Shares that TEN is offering to purchase pursuant to the Offer
represent approximately 17% of the Shares then outstanding. The Shares are
listed and principally traded on the New York Stock Exchange (the "NYSE") under
the symbol "CTG." On October 1, 1997, the last full trading day prior to the
announcement of the Offer, the last reported sale price of the Shares on the
NYSE Composite Tape was $23.31 per Share. SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
THE BOARD OF DIRECTORS OF CTG HAS ANNOUNCED A REDUCTION IN THE REGULAR
QUARTERLY CASH DIVIDEND OF CTG FROM $0.38 PER SHARE TO $0.25 PER SHARE EFFECTIVE
FOR THE FIRST QUARTER OF FISCAL 1998. SHARES TENDERED AND PURCHASED BY TEN WILL
NOT BE ENTITLED TO THE REGULAR QUARTERLY CASH DIVIDEND OF $0.25 PER SHARE TO BE
PAID BY CTG ON DECEMBER 19, 1997, TO HOLDERS OF RECORD ON DECEMBER 5, 1997, OR
TO ANY DIVIDENDS SUBSEQUENTLY DECLARED AND PAID.
Questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase, and such copies will be furnished promptly at TEN's expense.
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
------------------------------
The Dealer Manager for the Offer is:
PAINEWEBBER INCORPORATED
------------------
The date of this Offer to Purchase is October 2, 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF TEN,
CTG OR ANY OF THEIR SUBSIDIARIES AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES
PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY TEN, CTG OR ANY OF THEIR SUBSIDIARIES.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION PAGE
- ------------------------ -----------
SUMMARY..................................................................................................... 3
INTRODUCTION................................................................................................ 6
THE OFFER................................................................................................... 7
1. NUMBER OF SHARES; PRORATION....................................................... 7
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES....................................... 9
3. PROCEDURE FOR TENDERING SHARES.................................................... 9
4. WITHDRAWAL RIGHTS................................................................. 12
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.................... 12
6. CERTAIN CONDITIONS OF THE OFFER................................................... 13
7. PRICE RANGE OF SHARES; DIVIDENDS.................................................. 15
8. BACKGROUND AND PURPOSE OF THE OFFER............................................... 15
9. SOURCES AND AMOUNT OF FUNDS....................................................... 18
10. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES..................................... 19
11. FINANCIAL INFORMATION CONCERNING CTG.............................................. 19
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE
ACT............................................................................... 23
13. REGULATORY APPROVALS.............................................................. 23
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................... 23
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS............................... 27
16. FEES AND EXPENSES................................................................. 28
17. MISCELLANEOUS..................................................................... 29
</TABLE>
<PAGE>
SUMMARY
THIS GENERAL SUMMARY IS PROVIDED SOLELY FOR THE CONVENIENCE OF HOLDERS OF
SHARES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF AND THE
MORE SPECIFIC DETAILS CONTAINED IN THIS OFFER TO PURCHASE AND THE RELATED LETTER
OF TRANSMITTAL AND ANY AMENDMENTS HERETO AND THERETO. CAPITALIZED TERMS USED IN
THIS SUMMARY WITHOUT DEFINITION SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO
SUCH TERMS IN THIS OFFER TO PURCHASE.
<TABLE>
<S> <C>
TEN............................... The Energy Network, Inc., a Connecticut corporation with
principal executive offices at 100 Columbus Boulevard,
Hartford, Connecticut 06103.
CTG............................... CTG Resources, Inc., a Connecticut corporation with
principal executive offices at 100 Columbus Boulevard,
Hartford, Connecticut 06103.
The Shares........................ Shares of CTG Common Stock, without par value.
Number of Shares Sought........... 1,800,000 of the 10,663,641 Shares outstanding as of
September 29, 1997.
Purchase Price.................... TEN will select a single Purchase Price which will be
not greater than $27.00 or less than $23.50 per Share.
All Shares purchased by TEN will be purchased at the
Purchase Price even if tendered below the Purchase
Price. Each shareholder desiring to tender Shares must
specify in the Letter of Transmittal the minimum price
(not greater than $27.00 or less than $23.50 per Share)
at which such shareholder is willing to have his or her
Shares purchased by TEN. Shareholders wishing to
maximize the possibility that their Shares will be
purchased at the Purchase Price may check the box on the
Letter of Transmittal marked "Shares Tendered At
Purchase Price Determined By Dutch Auction." Checking
this box may result in a purchase of the Shares so
tendered at the minimum price of $23.50.
Expiration Date of Offer.......... October 30, 1997, at 12:00 Midnight, Eastern Standard
Time, unless extended by TEN.
How to Tender Shares.............. See Section 3. For further information, call the
Information Agent or consult your broker for assistance.
Proration......................... In the event more than 1,800,000 Shares have been
validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, the
purchase of Shares will be subject to proration. After
the purchase of "Odd Lot" Shares as described below,
Shares will be purchased on a pro rata basis. Proration
of Shares will be based on the ratio of the number of
Shares to be purchased by TEN pursuant to the Offer
(less Odd Lot Shares tendered at or below the Purchase
Price) to the total number of Shares tendered by all
shareholders at or below the Purchase Price (less Odd
Lot Shares tendered at or below the Purchase Price).
This ratio will be applied to all Shares tendered by
each shareholder to determine the number of Shares that
will be purchased from such shareholder pursuant to the
Offer.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Preliminary results of proration will be announced by
press release as promptly as practicable after the
Expiration Date.
Odd Lot Owners.................... There will be no proration of Shares tendered by any
shareholder beneficially owning less than 100 Shares as
of the close of business on October 2, 1997, and as of
the Expiration Date, who tenders all such Shares at or
below the Purchase Price and completes the box captioned
"Odd Lots" on the Letter of Transmittal and, if
applicable, the Notice of Guaranteed Delivery.
Shareholders tendering Odd Lots will avoid the payment
of brokerage commissions and the applicable odd lot
discount payable in a sale of Shares in a transaction
effected on a securities exchange.
Withdrawal Rights................. Tendered Shares may be withdrawn at any time until the
Expiration Date of the Offer and, unless previously
purchased, after December 1, 1997. See Section 4.
Purpose of Offer.................. CTG is adopting a financial strategy that is intended to
maximize shareholder value and favorably position CTG in
the current competitive environment. This financial
stategy includes: (a) recapitalizing TEN in a way that
will better enable CTG to respond as the natural gas
industry continues in a transition period between
regulation and open competition; (b) repositioning the
cash dividend to a level comparable with growth-oriented
companies through a reduction in CTG's current quarterly
dividend from $0.38 per share ($1.52 annually) to $0.25
per share ($1.00 annually); (c) setting CTG's dividend
target going forward at, on average, 50% to 55% of the
earnings that are paid out to shareholders as cash
dividends; and (d) repurchasing shares from those
shareholders who prefer a higher level of annual
dividends rather than a strategy of seeking improved
growth in earnings and market-price appreciation. The
recapitalization will be accomplished through TEN's
incurrence of up to $50,000,000 of additional debt for
the purchase of up to 1,800,000 Shares. CTG's next
dividend of $0.25 per Share is payable December 19,
1997, to shareholders of record on December 5, 1997. The
recapitalization and related steps are being effected by
CTG and CTG's nonregulated subsidiary, TEN, and will not
affect the capitalization or financial condition of
CTG's regulated subsidiary, Connecticut Natural Gas
Corporation.
Market Price of Shares............ On October 1, 1997, the last reported sale price of the
Shares on the NYSE Composite Tape was $23.31 per Share.
See Section 7.
Dividends......................... Shares tendered and purchased pursuant to the Offer will
not be entitled to the regular quarterly cash dividend
of $0.25 per Share to be paid by CTG on December 19,
1997, to holders of record on December 5, 1997, or to
any dividends subsequently declared and paid.
Brokerage Commissions............. Not payable by shareholders.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Stock Transfer Tax................ None, except as provided in Instruction 7 of the Letter
of Transmittal.
Payment Date...................... As promptly as practicable after the Expiration Date of
the Offer.
Further Information............... Any questions, requests for assistance or requests for
additional copies of this Offer to Purchase, the Letter
of Transmittal or other tender offer materials may be
directed to D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, Tel: (800) 578-5378 (toll free) or
(212) 269-5550 (call collect).
</TABLE>
5
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
CTG RESOURCES, INC.:
INTRODUCTION
The Energy Network, Inc., a Connecticut corporation ("TEN") and a wholly
owned subsidiary of CTG Resources, Inc., a Connecticut corporation ("CTG"),
invites the shareholders of CTG to tender shares of CTG Common Stock, without
par value (the "Shares"), at prices not greater than $27.00 or less than $23.50
per Share, net to the seller in cash, specified by such shareholders, upon the
terms and subject to the conditions set forth herein and in the related Letter
of Transmittal (which together constitute the "Offer").
TEN will determine a single per Share price (not greater than $27.00 or less
than $23.50 per Share) (the "Purchase Price") that it will pay for the Shares
validly tendered pursuant to the Offer and not withdrawn, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders. TEN will select the Purchase Price that will enable it to purchase
1,800,000 Shares (or such lesser number of Shares as are validly tendered at
prices not greater than $27.00 or less than $23.50 per Share) pursuant to the
Offer. Up to 1,800,000 Shares validly tendered at prices at or below the
Purchase Price and not withdrawn on or prior to the Expiration Date (as defined
in Section 1) will be purchased by TEN, upon the terms and subject to the
conditions of the Offer, including the provisions relating to proration
described in Sections 1 and 2. The Purchase Price will be paid in cash, net to
the seller, with respect to all Shares purchased. Shares tendered at prices in
excess of the Purchase Price and Shares not purchased because of proration or
invalid tender will be returned to shareholders.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares by TEN. TEN will pay all charges
and expenses of PaineWebber Incorporated (the "Dealer Manager"), Chase Mellon
Shareholder Services, L.L.C. (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent") incurred in connection with the Offer. See Section 16.
HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN
THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS
PAYMENTS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE
SECTIONS 3 AND 14.
Shareholders who are participants in the CTG Dividend Reinvestment Plan (the
"DRIP") or the CTG Employee Savings Plans (the "ESP") may tender part or all of
the Shares or unrestricted Shares, respectively, attributed to such
participant's account and in each case must specify the price or prices at which
such Shares are to be tendered. See Section 3. Shares held in a DRIP or
unrestricted Shares held in an ESP account as to which the Depositary has not
received timely instructions will not be tendered, even if other Shares are
tendered. See Section 3. Shares held in a DRIP account and all Shares held in an
ESP account will be included in the calculation of the aggregate number of
Shares beneficially owned by any shareholder for purposes of determining Odd Lot
Owners (as defined in Section 1).
NEITHER TEN, CTG NOR ANY OF THEIR SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS
TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER
OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER AND AT WHAT PRICE.
6
<PAGE>
TEN HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF TEN, CTG OR ANY OF THEIR
SUBSIDIARIES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
As of September 29, 1997, CTG had 10,663,641 Shares issued and outstanding.
As of September 29, 1997, there were approximately 9,166 holders of record of
Shares, including banks, brokers, fiduciaries and other nominees. The 1,800,000
Shares that TEN is offering to purchase represent approximately 17% of the
Shares outstanding on September 29, 1997.
The Shares are listed and traded on the New York Stock Exchange ("NYSE")
under the symbol "CTG." See Section 7. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions described herein and in the
Letter of Transmittal, TEN will purchase up to 1,800,000 Shares that are validly
tendered on or prior to the Expiration Date (and not properly withdrawn in
accordance with Section 4) at a price (determined in the manner set forth below)
not greater than $27.00 or less than $23.50 per Share. The later of 12:00
Midnight, Eastern Standard Time, on October 30, 1997, or the latest time and
date to which the Offer is extended, is referred to herein as the "Expiration
Date." If the Offer is oversubscribed as described below, only Shares validly
tendered at or below the Purchase Price on or prior to the Expiration Date will
be eligible for proration.
TEN will determine the Purchase Price taking into account the number of
Shares so tendered and the prices specified by tendering shareholders. TEN will
select the Purchase Price that will enable it to purchase 1,800,000 Shares (or
such lesser number of Shares as are validly tendered and not withdrawn at prices
not greater than $27.00 or less than $23.50 per Share) pursuant to the Offer.
TEN reserves the right to purchase more than 1,800,000 Shares pursuant to the
Offer, but does not currently plan to do so. The Offer is not conditioned on any
minimum number of Shares being tendered.
Shares tendered and purchased by TEN will not be entitled to the regular
quarterly cash dividend of $0.25 per Share to be paid by CTG on December 19,
1997, to holders of record on December 5, 1997, or to any dividends subsequently
declared and paid.
In accordance with Instruction 5 of the Letter of Transmittal, each
shareholder who wishes to tender Shares must specify the price (not greater than
$27.00 or less than $23.50 per Share) at which such shareholder is willing to
have TEN purchase such Shares. As promptly as practicable following the
Expiration Date, TEN will determine the Purchase Price (not greater than $27.00
or less than $23.50 per Share) that it will pay for Shares validly tendered
pursuant to the Offer, taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices greater than the
Purchase Price and Shares not purchased because of proration, will be returned
to the tendering shareholders at TEN's expense as promptly as practicable
following the Expiration Date.
Upon the terms and subject to the conditions of the Offer, if 1,800,000 or
fewer Shares have been validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, TEN will purchase all such Shares
(including fractional Shares held in the DRIP and unrestricted fractional Shares
held in the ESP). Upon the terms and subject to the conditions of the Offer, if
more than 1,800,000 Shares have been validly tendered at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date, TEN will purchase
Shares in the following order of priority:
(a) first, all Shares validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date by any shareholder (an
"Odd Lot Owner") who was as of the close of
7
<PAGE>
business on October 2, 1997, and will continue to be at the Expiration Date,
the record or beneficial owner of an aggregate of fewer than 100 Shares
(including any Shares held in the DRIP and all Shares held in the ESP), all
of which are being tendered (partial tenders will not qualify for this
preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, all Shares
validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date on a pro rata basis, if necessary (with
appropriate adjustments to avoid purchases of fractional Shares, other than
Shares held in the DRIP or unrestricted Shares held in the ESP).
Notwithstanding clause (b) above, TEN reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has validly tendered at or
below the Purchase Price all Shares owned, beneficially or of record, and as a
result of the proration contemplated by clause (b) would then own, beneficially
or of record, an aggregate of fewer than 100 Shares. If TEN exercises this
right, it will increase the number of Shares that are purchased pursuant to the
Offer in an amount sufficient to allow the exercise of the right (i.e., the
number of Shares that would be owned by all shareholders who would become Odd
Lot holders as a result of the proration contemplated by clause (b)).
If proration of tendered Shares is required, because of the difficulty in
determining the number of Shares validly tendered (including Shares tendered by
the guaranteed delivery procedure described in Section 3) and as a result of the
"odd lot" procedure described in Section 2 (the "Odd Lot Procedure"), TEN does
not expect that it will be able to announce the final proration factor or to
commence payment for any Shares purchased pursuant to the Offer until
approximately seven NYSE trading days after the Expiration Date. Proration of
Shares, other than Shares tendered pursuant to the Odd Lot Procedure, will be
based on the ratio of the number of Shares to be purchased by TEN pursuant to
the Offer (less Odd Lot Shares tendered at or below the Purchase Price) to the
total number of Shares tendered by all shareholders at or below the Purchase
Price (less Odd Lot Shares tendered at or below the Purchase Price). This ratio
will be applied to all Shares tendered by each shareholder to determine the
number of Shares that will be purchased from each shareholder pursuant to the
Offer. Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Holders of Shares may obtain
such preliminary information from the Dealer Manager or the Information Agent
and may also be able to obtain such information from their brokers. For a
discussion of certain federal income tax consequences to shareholders, see
Section 14.
TEN EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO PURCHASE
ADDITIONAL SHARES PURSUANT TO THE OFFER OR TO DECREASE THE NUMBER OF SHARES
BEING SOUGHT PURSUANT TO THE OFFER. If (i) TEN increases or decreases the price
to be paid for Shares, increases the number of Shares being sought and such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares or decreases the number of Shares being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner described
in Section 15, the Offer will be extended until the expiration of ten business
days from the date of publication of such notice.
TEN also expressly reserves the right, in its sole discretion, at any time
or from time to time, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depositary. See
Section 15. There can be no assurance, however, that TEN will exercise its right
to extend the Offer.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Eastern Time.
8
<PAGE>
Copies of this Offer to Purchase and the Letter of Transmittal are being
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on CTG's
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES.
All Shares validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date by or on behalf of any shareholder who was as
of the close of business on October 2, 1997, and will continue to be at the
Expiration Date, the record or beneficial owner of an aggregate of fewer than
100 Shares (including Shares held in the DRIP and all Shares allocated to the
shareholder's account in the ESP) all of which, other than restricted shares in
the shareholder's account in the ESP, are being tendered will be accepted
without proration. See Section 1. Partial tenders will not qualify for this
preference, and it is not available to beneficial holders of 100 or more Shares,
even if such holders have separate stock certificates for fewer than 100 Shares.
By accepting the Offer, an Odd Lot Owner will avoid the payment of brokerage
commissions and the applicable odd lot discount payable in a sale of such Shares
in a transaction effected on a securities exchange.
As of September 29, 1997, there were approximately 9,166 holders of record
of Shares, including banks, brokers, fiduciaries and other nominees.
Approximately 31% of these holders of record held individually fewer than 100
Shares and held in the aggregate approximately 90,039 Shares. Because of the
large number of Shares held in the names of brokers and nominees, TEN is unable
to estimate the number of beneficial owners of fewer than 100 Shares or the
aggregate number of Shares they own. Any Odd Lot Owner wishing to tender all of
his or her Shares free of proration must complete the box captioned "Odd Lots"
on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery.
3. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. To tender Shares validly pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal or
photocopy thereof, together with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) certificates for the Shares to be tendered must be
received by the Depositary at one of such addresses or (ii) such Shares must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery received by the Depositary including an
Agent's Message if the tendering shareholder has not delivered a Letter of
Transmittal), in each case on or prior to the Expiration Date, or (b) the
tendering holder of Shares must comply with the guaranteed delivery procedure
described below. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a book-entry confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that TEN may enforce such agreement against the participant.
IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, IN ORDER TO
TENDER SHARES PURSUANT TO THE OFFER, A SHAREHOLDER MUST INDICATE IN THE SECTION
CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON
THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $0.25) AT WHICH SUCH SHARES
ARE BEING TENDERED. Shareholders wishing to tender Shares at more than one price
must complete separate Letters of Transmittal for each price at which such
Shares are being tendered. The same Shares cannot be tendered at more than one
price. FOR A TENDER OF SHARES TO BE VALID, A PRICE BOX, BUT ONLY ONE PRICE BOX,
ON EACH LETTER OF TRANSMITTAL MUST BE CHECKED. Shareholders wishing to maximize
the possibility that their Shares will be purchased at the Purchase Price may
check the box on the Letter of Transmittal marked "Shares Tendered at Price
9
<PAGE>
Determined by Dutch Auction." Checking this box may result in a purchase of the
Shares so tendered at the minimum price of $23.50 per Share.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company and the Philadelphia Depository
Trust Company (collectively referred to as the "Book-Entry Transfer Facilities")
for purposes of the Offer within two business days after the date of this Offer
to Purchase, and any financial institution that is a participant in the system
of any Book-Entry Transfer Facility may make delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of such Book-Entry Transfer Facility.
Although delivery of Shares may be effected through book-entry transfer, a
properly completed and duly executed Letter of Transmittal or photocopy thereof,
together with any required signature guarantees or an Agent's Message in lieu of
the Letter of Transmittal and any other required documents, must, in any case,
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date, or the
tendering holder of Shares must comply with the guaranteed delivery procedure
described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States which is a participant in an
approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). Signatures on a Letter of Transmittal
need not be guaranteed if (a) the Letter of Transmittal is signed by the
registered holder of the Shares tendered therewith and such holder has not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or (b) such Shares
are tendered for the account of an Eligible Institution. See Instructions 1 and
6 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and cannot deliver certificates for such Shares and all other required
documents to the Depositary on or prior to the Expiration Date or the procedure
for book-entry transfer cannot be complied with in a timely manner, such Shares
may nevertheless be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by TEN (with any required
signature guarantees) is received by the Depositary as provided below on or
prior to the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal (or photocopy thereof or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal,
are received by the Depositary no later than 12:00 Midnight, Eastern
Standard Time, on the third NYSE trading day after the date of execution of
the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in such Notice.
The method of delivery of Shares and all other required documents is at the
option and risk of the tendering shareholder. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases sufficient time should be allowed to assure timely delivery.
10
<PAGE>
FEDERAL BACKUP WITHHOLDING. To avoid federal income tax backup withholding
equal to 31% of the gross payments made to a shareholder pursuant to the Offer,
such shareholder must notify the Depositary of such shareholder's correct
taxpayer identification number and provide certain other information by properly
completing the Substitute Form W-9 included in the Letter of Transmittal.
Foreign shareholders (as defined in Section 14) may be required to submit a
properly completed Form W-8, certifying as to their non-United States status, in
order to avoid backup withholding. In addition, foreign shareholders may be
subject to federal withholding tax at the rate of 30% (or a lower applicable
treaty rate) on gross payments received pursuant to the Offer (as discussed in
Section 14). For a discussion of certain federal income tax consequences to
tendering shareholders, see Section 14. EACH SHAREHOLDER IS URGED TO CONSULT
WITH HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM
OR HER OF TENDERING SHARES PURSUANT TO THE OFFER, INCLUDING THE APPLICABILITY OF
FEDERAL BACKUP WITHHOLDING.
DETERMINATION OF VALIDITY. All questions as to the Purchase Price, the form
of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by TEN, in its
sole discretion, and its determination will be final and binding. TEN reserves
the absolute right to reject any or all tenders of Shares that it determines are
not in proper form or the acceptance for payment of or payment for Shares that
may, in the opinion of TEN's counsel, be unlawful. TEN also reserves the
absolute right to waive any defect or irregularity in any tender of Shares. None
of TEN, CTG, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notice of any defect or irregularity
in tenders, nor shall any of them incur any liability for failure to give any
such notice.
RULE 14E-4. It is a violation of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for a person to tender
Shares for his or her own account unless, at the time of tender and at the end
of the proration period or period during which Shares are accepted by lot
(including any extensions thereof), the person so tendering (i) has a net long
position equal to or greater than the amount of (x) Shares tendered or (y) other
securities immediately convertible into, exercisable, or exchangeable for the
amount of Shares tendered and will acquire such Shares for tender by conversion,
exercise or exchange of such other securities and (ii) will cause such Shares to
be delivered in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. The tender of Shares pursuant to any one of the procedures
described above will constitute the tendering shareholder's representation and
warranty that (i) such shareholder has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act and
(ii) the tender of such Shares complies with Rule 14e-4. TEN's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering shareholder and TEN upon the terms and subject
to the conditions of the Offer.
CTG DIVIDEND REINVESTMENT PLAN. A shareholder participating in the DRIP who
wishes to tender Shares held in such participant's account in the DRIP should
complete the "Dividend Reinvestment Plan Shares" section of the Letter of
Transmittal. Any DRIP Shares tendered but not purchased will be returned to the
participant's DRIP account. If a participant tenders all of his or her Shares
held in a DRIP account and all such Shares are purchased by TEN pursuant to the
Offer, such tender will be deemed to be authorization and written notice to CTG
to terminate such shareholder's participation in the DRIP, subject to a
shareholder's right to recommence participation in accordance with the terms of
the DRIP.
CTG EMPLOYEE SAVINGS PLANS. A shareholder participating in the ESP who
wishes to tender unrestricted Shares held in such participant's account in the
ESP should complete the "Employee Savings Plans Shares" section of the Letter of
Transmittal. Any unrestricted ESP Shares tendered but not purchased will be
returned to the participant's ESP account.
11
<PAGE>
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after December 1, 1997, unless theretofore accepted
for payment as provided in this Offer to Purchase. If TEN extends the period of
time during which the Offer is open, is delayed in accepting for payment or
paying for Shares or is unable to accept for payment or pay for Shares pursuant
to the Offer for any reason, then, without prejudice to TEN's rights under the
Offer, the Depositary may, on behalf of TEN, retain all Shares tendered, and
such Shares may not be withdrawn except as otherwise provided in this Section 4,
subject to Rule 13e-4(f)(5) under the Exchange Act, which provides that the
issuer making the tender offer shall either pay the consideration offered, or
return the tendered securities promptly after the termination or withdrawal of
the tender offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase. Any notice of withdrawal must specify
the name of the person who tendered the Shares to be withdrawn and the number of
Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution) must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering shareholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 3 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by TEN, in its sole discretion, which
determination will be final and binding. None of TEN, CTG, the Dealer Manager,
the Depositary, the Information Agent, or any other person will be under any
duty to give notification of any defect or irregularity in any notice of
withdrawal or incur any liability for failure to give any such notification.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer and as promptly as
practicable after the Expiration Date, TEN will determine the Purchase Price,
taking into account the number of Shares tendered and the prices specified by
tendering shareholders, announce the Purchase Price, and will (subject to the
proration provisions of the Offer) accept for payment and pay for Shares validly
tendered at or below the Purchase Price. Thereafter, payment for all Shares
validly tendered on or prior to the Expiration Date and accepted for payment
pursuant to the Offer will be made by the Depositary by check as promptly as
practicable. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of
certificates for Shares (or of a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal or
manually signed photocopy thereof, and any other required documents.
For purposes of the Offer, TEN will be deemed to have accepted for payment
(and thereby purchased) Shares that are validly tendered and not withdrawn as,
if and when it gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. TEN will pay for Shares that it has purchased
pursuant to the Offer by depositing the Purchase Price therefor with the
Depositary. The Depositary will act as agent for tendering shareholders for the
purpose of receiving payment from TEN
12
<PAGE>
and transmitting payment to tendering shareholders. Under no circumstances will
interest be paid on amounts to be paid to tendering shareholders, regardless of
any delay in making such payment.
Certificates for all Shares not purchased will be returned (or, in the case
of Shares tendered by book-entry transfer, such Shares will be credited to an
account maintained with a Book-Entry Transfer Facility) as promptly as
practicable without expense to the tendering shareholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered or if proration is required. See Section
1. In addition, if certain events occur, TEN may not be obligated to purchase
Shares pursuant to the Offer. See Section 6.
TEN will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the Purchase Price is to be made to, or Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered holder, or if tendered Shares are registered in the name of
any person other than the person signing the Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder, such
other person or otherwise) payable on account of the transfer to such person
will be deducted from the Purchase Price unless satisfactory evidence of the
payment of such taxes, or exemption therefrom, is submitted. See Instruction 7
of the Letter of Transmittal.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, TEN will not be required
to accept for payment or pay for any Shares tendered, and may terminate or amend
the Offer or may postpone (subject to the requirements of the Exchange Act for
prompt payment for or return of Shares) the acceptance for payment of, or the
purchase of and payment for, Shares tendered, if at any time on or after October
2, 1997, and before the time of payment for any such Shares (whether any Shares
have theretofore been accepted for payment, purchased or paid for pursuant to
the Offer) any of the following events shall have occurred (or shall have been
determined by TEN in its sole judgment to have occurred) regardless of the
circumstances giving rise thereto (including any action or omission to act by
TEN or CTG):
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person, domestic
or foreign, or before any court, authority, agency or tribunal or any other
person, domestic or foreign, or any judgment, order or injunction entered,
enforced or deemed applicable by any such authority, agency, tribunal or
other person, that (i) challenges the acquisition of Shares pursuant to the
Offer or otherwise in any manner relates to or affects the Offer, or (ii) in
the sole judgment of TEN, could materially and adversely affect the
business, condition (financial or other), income, operations or prospects of
CTG and its subsidiaries, taken as a whole, or otherwise materially impair
in any way the contemplated future conduct of the business of CTG or any of
its subsidiaries or materially impair the contemplated benefits of the Offer
to TEN or CTG;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, withdrawn or abrogated or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the Offer,
or to CTG or any of its subsidiaries, by any legislative body, court,
authority, agency or tribunal, domestic or foreign, which, in TEN's sole
judgment, would or might directly or indirectly (i) make the acceptance for
payment of, or payment for, some or all of the Shares, illegal or otherwise
restrict or prohibit consummation of the Offer, (ii) delay or restrict the
ability of TEN, or render TEN unable, to accept for payment or pay for some
or all of the Shares, as the case may be, (iii) materially impair the
contemplated benefits of the Offer to TEN or CTG or (iv) materially affect
the business, condition (financial or other), income, operations or
prospects of CTG or any of its subsidiaries or otherwise materially impair
in any way the contemplated future conduct of the business of CTG or any of
its subsidiaries;
13
<PAGE>
(c) it shall have been publicly disclosed or TEN shall have learned that
(i) any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) has acquired or proposes to acquire beneficial ownership of
more than 5% of the outstanding Shares whether through the acquisition of
stock, the formation of a group, the grant of any option or right, or
otherwise (other than as disclosed in a Schedule 13D or 13G (or an amendment
thereto) on file with the Securities and Exchange Commission (the
"Commission") on October 2, 1997), (ii) any such person or group that on or
prior to October 2, 1997, had filed such a Schedule with the Commission
thereafter shall have acquired or shall propose to acquire, whether through
the acquisition of stock, the formation of a group, the grant of any option
or right, or otherwise, beneficial ownership of additional Shares
representing 2% or more of the outstanding Shares, (iii) any new group shall
have been formed which beneficially owns more than 5% of the outstanding
Shares, or (iv) any person, entity or group shall have filed a Notification
and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or made a public announcement reflecting an intent to acquire CTG or
any of its subsidiaries or any of their respective assets or securities;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) any significant decline in the
market price of the Shares or in the general level of market prices of
equity securities in the United States or abroad, (iii) any change in the
general political, market, economic or financial condition in the United
States or abroad that could have a material adverse effect on CTG or any of
its subsidiaries' business, condition (financial or other), income,
operations, prospects or ability to obtain financing generally or the
trading in the Shares, (iv) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event which, in TEN's sole judgment, might affect the
extension of credit by lending institutions in the United States, (v) the
commencement of a war, armed hostilities or other international or national
crisis directly or indirectly involving the United States or (vi) in the
case of any of the foregoing existing at the time of the commencement of the
Offer, in TEN's sole judgment, a material acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger, acquisition or other business
combination proposal for CTG or any subsidiary, shall have been proposed,
announced or made by a person other than TEN; or
(f) there shall have occurred any event or events that have resulted in,
or may in the sole judgment of TEN result in, an actual or threatened change
in the business, condition (financial or other), income, operations, stock
ownership or prospects of CTG or any of its subsidiaries, or materially
impair the contemplated benefits of the Offer to TEN or CTG;
and, in the sole judgment of TEN, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for payment or
payment.
Any of the foregoing conditions may be waived by TEN, in whole or in part,
at any time and from time to time in its sole discretion. The failure by TEN at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by TEN concerning
the events described above will be final and binding on all parties.
14
<PAGE>
7. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and traded on the NYSE under the symbol "CTG." The
following table sets forth for the periods indicated the high and low sales
prices of the Shares on the NYSE Composite Tape as reported in THE WALL STREET
JOURNAL.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
SALE PRICE SALE PRICE SALE PRICE SALE PRICE
----------- ----------- ----------- -----------
First Quarter...................................................... $ 25.50 $ 22.63 $ 25.13 $ 21.63
Second Quarter..................................................... 25.38 21.38 24.50 22.75
Third Quarter...................................................... 22.25 20.75 24.63 21.88
Fourth Quarter..................................................... 23.63 21.63 24.25 22.00
</TABLE>
The high and low sale prices for CTG's Common Stock as reported on the NYSE
Composite Tape for October 1, 1997, the last trading day prior to the
announcement of the Offer, were: High--$23.38, Low-- $23.13. The last reported
sale price of the Shares on the NYSE Composite Tape for October 1, 1997 was
$23.31 per Share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES.
Quarterly dividends paid on each Share during fiscal 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------- -------------------
<S> <C> <C>
First Quarter............................................................. $ 0.38 $ 0.37
Second Quarter............................................................ 0.38 0.37
Third Quarter............................................................. 0.38 0.38
Fourth Quarter............................................................ 0.38 0.38
</TABLE>
On September 26, 1997, CTG paid a dividend of $0.38 per Share as declared by
the Board of Directors on July 22, 1997. On October 1, 1997, CTG announced a
dividend of $0.25 per Share for the first quarter of 1998. The dividend is to be
paid on December 19, 1997, to holders of record on December 5, 1997. This
represents a reduction in the regular quarterly dividend from the previous level
of $0.38 per share ($1.52 annually). SHARES TENDERED AND PURCHASED BY TEN WILL
NOT BE ENTITLED TO THE QUARTERLY CASH DIVIDEND TO BE PAID ON DECEMBER 19, 1997,
OR TO ANY DIVIDENDS SUBSEQUENTLY DECLARED AND PAID. In addition, Shares tendered
and purchased by TEN will not be entitled to any dividends in respect of any
later dividend periods. Future dividend action will be guided by, among other
factors, a target recently established by the CTG Board of Directors of paying
out approximately 50% to 55% of CTG's earnings on average. The declaration and
payment of future dividends will be dependent on CTG's earnings and financial
condition, economic and market conditions and other factors deemed relevant by
CTG's Board of Directors.
8. BACKGROUND AND PURPOSE OF THE OFFER.
A substantial portion of the gas industry has become deregulated and subject
to open competition. The Federal Energy Regulatory Commission's Order 636
substantially deregulated the interstate gas pipeline industry and since April
1, 1996, Connecticut's gas companies have offered firm transportation services
to their commercial and industrial customers. As a result, large users are now
able to negotiate their own supply contracts and independent brokers, marketers
and others may sell gas to commercial and industrial customers throughout
Connecticut.
Effective March 31, 1997 and in response to such competition and
deregulation, CTG became the holding company and parent of Connecticut Natural
Gas Corporation ("CNG"), a regulated utility, and its unregulated subsidiaries,
including TEN. The primary purpose of the restructuring was to provide CNG
15
<PAGE>
and its affiliates with greater financial flexibility to develop and operate new
businesses in an increasingly competitive business environment. CTG's management
believes that the holding company structure has enabled CTG to better define and
separate its regulated and unregulated businesses and to protect the regulated
businesses and its customers from the risks associated with the unregulated
businesses and ventures.
CTG is adopting a financial strategy that is intended to maximize
shareholder value and favorably position CTG in the current competitive
environment. This financial strategy includes: (a) recapitalizing TEN in a way
that will better enable CTG to respond as the natural gas industry continues in
a transition period between regulation and open competition; (b) repositioning
the cash dividend to a level comparable with growth-oriented companies through a
reduction in CTG's current quarterly dividend from $0.38 per share ($1.52
annually) to $0.25 per share ($1.00 annually); (c) setting CTG's dividend target
going forward at, on average, 50% to 55% of the earnings that are paid out to
shareholders as cash dividends; and (d) repurchasing shares from those
shareholders who prefer a higher level of annual dividends rather than a
strategy of seeking improved growth in earnings and market-price appreciation.
The recapitalization is being effected through this Offer to Purchase
approximately 17% of the outstanding Shares. As part of the new strategy, CTG's
Board of Directors also announced on October 1, 1997 a reduction in CTG's
quarterly Common Stock dividend rate to $0.25 per Share ($1.00 annually) from
the previous $0.38 per Share ($1.52 annually). The quarterly dividend announced
on October 1, 1997 is payable on December 19, 1997 to shareholders of record on
December 5, 1997. See Section 7.
CTG's Board of Directors believes that the dividend action better positions
the Shares for market value growth and a slightly lower income orientation than
in the past. This means that a higher proportion of the total return to
shareholders will need to come from capital gains as compared to dividend
income. From the standpoint of most individual investors, current federal tax
law makes capital gains more attractive than dividend income. The current
marginal federal income tax rate on capital gains is substantially lower than
the highest marginal federal income tax rate on dividend income. However,
capital gains are not as predictable as dividend income and are dependent on
factors including, but not limited to, CTG's ability to increase its earnings
and cash flow. Moreover, capital gains can be impacted by factors outside the
control of management such as the general level of inflation, interest rates in
the economy and stock market fluctuations.
The price range established for the Offer will allow shareholders who desire
a more income-oriented investment to liquidate their investment in CTG at a
price in excess of the closing sale price of the Shares immediately prior to the
announcement of the Offer. In addition, shareholders who choose not to tender
their Shares are also in a position to benefit from this transaction. The
non-tendering shareholders will own a greater interest in a more competitive
company with a stronger earnings per share growth rate potential.
The Offer will afford to shareholders who are considering the sale of all or
a portion of their Shares the opportunity to determine the price at which they
are willing to sell their Shares and, in the event TEN accepts such Shares for
purchase, to dispose of Shares without the usual transaction costs associated
with an open market sale, including brokerage commissions. The Offer will also
allow qualifying shareholders owning beneficially fewer than 100 Shares to avoid
the applicable odd lot discount payable on a sale of Shares in a transaction
effected on a securities exchange. Correspondingly, the costs to CTG for
servicing the accounts of Odd Lot Owners will be reduced. See Section 2.
TEN expects to incur up to $50,000,000 of debt in connection with the
purchase of the Shares pursuant to the Offer. A reduction in CTG's consolidated
common shareholders' equity will result from the purchase of Shares by TEN
according to the Offer and, when combined with TEN's newly incurred debt, will
increase CTG's consolidated debt-to-total capital ratio at June 30, 1997 from
45.7% to a pro forma level of 60.7% (See Section 11). CTG believes that in a
competitive environment a target debt-to-total capital ratio of 50% is
appropriate. In addition, CTG believes its earnings and cash flow will be
16
<PAGE>
sufficient to allow it to retain earnings and reduce debt so that such a 50%
target ratio can be achieved within several years. There can be no assurances,
however, that such target ratio can be achieved or that economic or industry
factors will not make achieving such ratio impracticable or undesirable.
CTG believes its financial strategy will enable it to raise sufficient funds
to replace existing assets and undertake investments in new growth while
maintaining a prudent balance between debt and equity in the capital structure.
CTG also believes that this strategy preserves the financial flexibility
necessary to accommodate unexpected future cash needs.
Shares TEN purchases pursuant to the Offer will be transferred directly to
CTG from the Depositary and retained by CTG as authorized but unissued shares
and, unless and until CTG determines to cancel such Shares, will be available
for CTG to issue without further shareholder action (except as required by
applicable law or the rules of any securities exchange on which Shares are
listed) for purposes including, but not limited to, the acquisition of other
businesses, the raising of additional capital for use in CTG's business and the
satisfaction of obligations under existing or future employee benefit plans. CTG
has no current plans for issuance of the Shares repurchased pursuant to the
Offer.
As of September 29, 1997, CTG had 10,663,641 Shares issued and outstanding.
The 1,800,000 Shares that TEN is offering to purchase represent approximately
17% of the Shares then outstanding. As of September 29, 1997, all directors and
executive officers of CTG and its subsidiaries (including TEN) as a group owned
beneficially an aggregate of 101,916 Shares. TEN has been advised that no
director or officer of TEN, CTG or any of their subsidiaries intends to tender
Shares pursuant to the Offer. If TEN purchases 1,800,000 Shares pursuant to the
Offer and no director or executive officer of TEN or CTG or any of their
subsidiaries tenders Shares, the percentage of outstanding Shares owned
beneficially by all of CTG's directors and executive officers as a group would
increase to approximately 1.1% of the Shares then outstanding.
Except as disclosed in this Section 8 and elsewhere in this Offer to
Purchase (see "The Offer--Price Range of Shares; Dividends" and "--Financial
Information Concerning CTG"), neither TEN, CTG nor any of their subsidiaries has
any plans or proposals that relate to or would result in: (a) the acquisition by
any person of additional securities of CTG, or the disposition of securities of
CTG; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving CTG or any of its subsidiaries; (c) a
sale or transfer of a material amount of assets of CTG or any of its
subsidiaries; (d) any change in the present Board of Directors or management of
CTG including, but not limited to, any plans or proposals to change the number
or the terms of directors, to fill any existing vacancy on the board or to
change any material term of the employment contract of any executive officer;
(e) any other material change in the present dividend rate or policy, or
indebtedness or capitalization of CTG; (f) any other material change in CTG's
corporate structure or business; (g) any change in CTG's Articles of
Incorporation or By-Laws or other actions that may impede the acquisition of
control of CTG by any person; (h) a class of equity security of CTG being
delisted from a national securities exchange; (i) a class of equity security of
CTG becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act; or (j) the suspension of CTG's obligation to file
reports pursuant to Section 15(d) of the Exchange Act.
Statements contained in this Offer to Purchase and particularly in this
Section 8, regarding the future-earnings prospects, growth in earnings per
Share, dividend policy and target debt-to-capital ratio of CTG are not
historical facts and are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Each
of these items is dependent on the earnings and cash flow of CTG. A number of
important factors could cause actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of TEN or CTG.
Some of the most important factors that will impact CTG's earnings and cash
flow, primarily through its wholly owned subsidiaries CNG and TEN, include, but
are not limited to, fluctuations in customer growth and demand,
17
<PAGE>
competitive conditions, weather, fuel costs and availability, regulatory action,
federal and state legislation, interest rates, labor actions, maintenance and
capital expenditures and local economic conditions.
9. SOURCES AND AMOUNT OF FUNDS.
TEN estimates that its maximum cost of purchasing 1,800,000 Shares pursuant
to the Offer (including all fees and expenses relating to the Offer, but
excluding interest on funds borrowed to finance such purchase of Shares) will
approximate $50,000,000. TEN has obtained commitments to provide the necessary
funds pursuant to (i) a $10,000,000 three-year revolving credit facility (the
"Three-Year Facility") and a $10,000,000 364-day revolving credit facility (the
"Short-Term Facility" and, together with the Three-Year Facility, the "Credit
Facilities") with Fleet National Bank ("Fleet") and (ii) the private placement
with Metropolitan Life Insurance Company and Texas Life Insurance Company
(collectively the "Note Purchasers") of $45,000,000 of 6.99% Senior Secured
Notes (the "Notes") due November 1, 2009 with an average life of approximately 8
years and a final maturity of twelve years. Borrowings under the Three-Year
Facility will bear interest at LIBOR plus 0.65% per annum or a bank rate and
borrowings under the Short-Term Facility will bear interest at LIBOR plus 0.60%
per annum or a bank rate.
Borrowings under the Credit Facilities, the Notes and certain other debts of
TEN will rank PARI PASSU in right of payment. Borrowings under the Credit
Facilities and the Notes are secured by a first priority security interest in
the Forward Equity Purchase Agreement made as of October 1, 1997 (the "Forward
Equity Purchase Agreement") between TEN and CTG and by pledges of the stock of
subsidiaries of TEN, each of which will guarantee indebtedness under the Credit
Facilities and the Notes.
The Credit Facilities will obligate TEN to pay certain facility fees,
acceptance fees, underwriting fees, annual administrative fees, and to reimburse
Fleet for certain fees and expenses it incurs in making the loans. The Credit
Facilities will also contain certain financial covenants related to TEN's ratios
of debt to capital and earnings to interest expense and usual and customary (a)
affirmative and negative covenants, including restrictions on TEN's ability,
subject to certain exceptions, to incur debt, pay dividends and enter into
mergers, acquisitions, divestitures or stock redemptions and (b) events of
default, including failure to pay principal or interest, breaches of
representations or covenants, certain events of bankruptcy or insolvency and a
change in control (as defined therein).
The Notes will bear interest at the rate of 6.99% per annum. The principal
of the Notes will be amortized at the rate of $2,500,000 each May 1 and November
1, beginning May 1, 2001 through November 1, 2009. The Notes will be callable at
the option of TEN at any time prior to maturity, subject to certain "make-whole
provisions." The Notes will be subject to usual and customary (a) affirmative
and negative covenants, including restrictions on TEN's ability, and subject to
certain exceptions, to incur debt, make certain restricted payments (including
dividends and other payments to CTG) and engage in certain transactions,
including certain transactions with affiliates, and (b) events of default,
including failure to pay principal or interest, breaches of representations or
warranties, defaults in performance of financial covenants, certain other
covenant defaults and certain events of bankruptcy or insolvency. In addition,
TEN will agree not to amend or modify the Forward Equity Purchase Agreement
without the consent of the Note Purchasers.
Pursuant to the Forward Equity Purchase Agreement, (a) CTG has agreed to
fund, on the first day of each January, April, July and October in each of the
calendar years 1998 through and including 2009, $1,875,000 ($90,000,000 in the
aggregate) in order to enable TEN to carry on its business and (b) TEN has
agreed to purchase or otherwise acquire not less than 1,800,000 Shares, such
purchase or acquisition to be by open market purchase, tender offer (including
the Offer) and/or otherwise (other than a purchase or acquisition directly from
CTG or its affiliates). The Forward Equity Purchase Agreement provides that TEN
shall promptly transfer or cause to be transferred any Shares so purchased or
otherwise acquired to CTG.
18
<PAGE>
TEN intends to repay borrowings under the Credit Facilities and the Notes
with its operating cash flow and with additional capital that it will receive
from CTG from time to time, including amounts received pursuant to the Forward
Equity Purchase Agreement.
10. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES.
Except as set forth in Exhibit A hereto, based upon TEN, CTG and their
subsidiaries' records and upon information provided to TEN, CTG and their
subsidiaries by their respective directors, officers and affiliates, neither TEN
nor, to TEN's knowledge, any director or officer of TEN or CTG, any person
controlling TEN, any director or officer of any corporation ultimately in
control of TEN or any associate or subsidiary of any of the foregoing, including
any director or officer of any such subsidiary, has effected any transactions in
the Shares during the 40 business day period preceding the date hereof. Except
pursuant to the Forward Equity Purchase Agreement and as otherwise set forth in
this Offer to Purchase under the caption "The Offer--Sources and Amount of
Funds," neither TEN nor CTG or, to TEN or CTG's knowledge, any director or
officer of TEN or CTG, any person controlling TEN or any director or executive
officer of any corporation ultimately in control of TEN or any associate or
subsidiary of any of the foregoing, including any director or officer of any
such subsidiary, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to the Shares (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations).
11. FINANCIAL INFORMATION CONCERNING CTG.
CTG is a holding company and owns all of the outstanding common stock of its
subsidiaries. The consolidated financial statements of CTG include the
consolidated accounts of CNG, CTG's regulated utility subsidiary, and the
consolidated accounts of TEN, CTG's unregulated subsidiary.
CNG is engaged principally in the retail distribution of natural gas in
Hartford, New Britain and 19 other cities and towns in central Connecticut and
in Greenwich, Connecticut. TEN provides, directly and through its subsidiary,
The Hartford Steam Company, district heating and cooling services to buildings
in Hartford, Connecticut.
Set forth below is certain summary audited and unaudited consolidated
historical and pro forma financial information relating to CTG. The consolidated
historical financial information (other than the ratios of earnings to fixed
charges) was derived from the audited consolidated financial statements included
in CNG's Annual Report on Form 10-K for the fiscal year ended September 30, 1996
(the "1996 Annual Report"), and from the summary consolidated financial
statements included in CTG's Quarterly Report on Form 10-Q for the period ended
June 30, 1997 (the "1997 Third Quarter Report"), each of which is hereby
incorporated herein by reference, and the other information and data contained
in the 1996 Annual Report and the 1997 Third Quarter Report. More comprehensive
financial information is included in such reports and the financial information
that follows is qualified in its entirety by reference to such reports and all
of the financial statements and related notes contained therein, copies of which
may be obtained as set forth under the caption "The Offer--Miscellaneous."
19
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED JUNE
SEPTEMBER 30, 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1996 1995 1997 1996
---------- ---------- ---------- ----------
INCOME STATEMENT DATA:
Operating revenues............................................... $ 315,363 $ 275,185 $ 267,184 $ 275,022
Operating margin................................................. 128,478 147,764 110,126 114,352
---------- ---------- ---------- ----------
Other operating expenses......................................... 97,974 86,966 81,313 83,345
---------- ---------- ---------- ----------
Operating income............................................. 30,504 29,159 28,813 31,007
---------- ---------- ---------- ----------
Total other income, net of income taxes.......................... 2,206 2,051 947 870
---------- ---------- ---------- ----------
Interest and debt expense, net................................... 13,715 14,191 9,697 10,377
---------- ---------- ---------- ----------
Net income....................................................... 18,995 17,019 20,063 21,500
Less--dividends on preferred stock............................... 63 62 46 47
---------- ---------- ---------- ----------
Net income applicable to common stock............................ $ 18,932 $ 16,957 $ 20,017 $ 21,453
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income per average share of common stock (1)..................... $ 1.87 $ 1.71 $ 1.88 $ 2.15
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average common shares outstanding during the period
(in thousands)................................................. 10,147 9,927 10,631 9,985
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividends per share of common stock.............................. $ 1.50 $ 1.48 $ 1.14 $ 1.12
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
OPERATING DATA:
Ratio of earnings to fixed charges (2)........................... 3.3 2.7 5.0 4.9
Interest and dividend coverage (3)............................... 1.5 1.3 2.2 2.3
Capitalization ratios: (4)
Common shareholders' equity.................................. 52.7% 49.2% 54.0% 53.3%
Preferred stock.............................................. 0.3% 0.3% 0.3% 0.3%
Long-term debt............................................... 47.0% 50.5% 45.7% 46.4%
---------- ---------- ---------- ----------
Total capitalization..................................... 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
BALANCE SHEET DATA (END OF PERIOD):
Total assets..................................................... $ 466,979 $ 465,039 $ 468,426 $ 489,469
Long-term debt (less current maturities)......................... 136,432 150,390 135,447 149,265
Total common stock equity........................................ 168,882 150,111 175,950 175,940
Book value per share (5)......................................... 16.64 15.12 16.55 17.62
</TABLE>
NOTES TO SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION:
(1) All earnings per share data are based on the weighted average shares
outstanding during the applicable periods.
(2) The ratios of earnings to fixed charges were calculated by dividing earnings
before interest and income taxes by interest.
(3) Interest and dividend coverage ratios were calculated by dividing earnings
before interest and income taxes by interest plus dividends.
(4) Capitalization ratios have been calculated including the current maturities
of long-term debt.
(5) Book value per share is calculated as the total shareholders' equity divided
by the number of shares outstanding at the end of the period.
20
<PAGE>
The summary unaudited consolidated pro forma financial information gives
effect to the purchase of Shares pursuant to the Offer, based on assumptions
described in the Notes to Summary Consolidated Historical and Pro Forma
Financial Information as if such event had occurred at the beginning of each
period presented (in the case of income statement data) or on September 30, 1996
or June 30, 1997, as the case may be (in the case of balance sheet data). The
summary unaudited consolidated pro forma financial information should be read in
conjunction with the summary consolidated historical financial information and
does not purport to be indicative of the results that would actually have been
obtained had the purchase of the Shares pursuant to the Offer been completed at
the dates indicated or that may be obtained in the future.
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 JUNE 30, 1997
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
PRO FORMA PRO FORMA
$27.00 PER $27.00 PER
SHARE SHARE
PURCHASE PURCHASE
HISTORICAL PRICE HISTORICAL PRICE
---------- --------------- ----------- ---------------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................................... $ 315,363 $ 315,363 $ 267,184 $ 267,184
Operating margin..................................... 128,478 128,478 110,126 110,126
---------- --------------- ----------- ---------------
Other operating expenses (1)......................... 97,974 96,530 81,313 80,221
---------- --------------- ----------- ---------------
Operating income (2)............................. 30,504 31,948 28,813 29,905
---------- --------------- ----------- ---------------
Total other income, net of income taxes.............. 2,206 2,206 947 947
---------- --------------- ----------- ---------------
Interest and debt expense, net (3)................... 13,715 17,154 9,697 12,307
---------- --------------- ----------- ---------------
Net income........................................... 18,995 17,000 20,063 18,545
Less--dividends on preferred stock................... 63 63 46 46
---------- --------------- ----------- ---------------
Net income applicable to common stock................ $ 18,932 $ 16,937 $ 20,017 $ 18,499
---------- --------------- ----------- ---------------
---------- --------------- ----------- ---------------
Income per average share of common
stock (4).......................................... $ 1.87 $ 2.03 $ 1.88 $ 2.09
---------- --------------- ----------- ---------------
---------- --------------- ----------- ---------------
Average common shares outstanding during the period
(in thousands) (5)................................. 10,147 8,347 10,631 8,831
---------- --------------- ----------- ---------------
---------- --------------- ----------- ---------------
Dividends per share of common stock (6).............. $ 1.50 $ 1.00 $ 1.14 $ 0.75
---------- --------------- ----------- ---------------
---------- --------------- ----------- ---------------
OPERATING DATA:
Ratio of earnings to fixed charges (7)............... 3.3 2.9 5.0 4.2
Interest and dividend coverage (8)................... 1.5 1.9 2.2 2.7
Capitalization ratios: (9)
Common shareholders' equity...................... 52.7% 37.5% 54.0% 39.0%
Preferred stock.................................. 0.3% 0.3% 0.3% 0.3%
Long-term debt................................... 47.0% 62.2% 45.7% 60.7%
---------- --------------- ----------- ---------------
Total capitalization......................... 100.0% 100.0% 100.0% 100.0%
---------- --------------- ----------- ---------------
---------- --------------- ----------- ---------------
BALANCE SHEET DATA (END OF PERIOD):
Total assets......................................... $ 466,979 $ 466,979 $ 468,426 $ 468,426
Long-term debt (less current maturities) (10)........ 136,432 184,499 135,447 183,514
Total common stock equity............................ 168,882 119,782 175,950 126,850
Book value per share (11)............................ 16.64 13.57 16.55 14.36
</TABLE>
21
<PAGE>
NOTES TO SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION:
(1) Pro forma represents decreased expenses due to the lower income taxes
because of the increased cost on the pro forma debt.
(2) Pro forma represents operating income increased by the reduction in income
taxes in (1) above.
(3) Pro forma represents historical interest plus interest calculated on
additional debt to fund stock repurchase.
(4) Represents earnings per share based on pro forma net income divided by the
pro forma shares outstanding.
(5) Represents shares outstanding less the 1,800 Shares purchased pursuant to
the Offer. There can be no assurance that TEN will purchase 1,800 Shares.
(6) Pro forma represents dividends at $0.25 per share per quarter.
(7) Ratios of earnings to fixed charges were calculated by dividing earnings
before interest and income taxes by interest.
(8) Interest and dividend coverage ratios were calculated by dividing earnings
before interest and income taxes by interest plus dividends.
(9) Capitalization ratios have been calculated including the current maturities
of long-term debt.
(10) Represents long-term debt outstanding plus $45,000 of pro forma debt from
the Notes at 6.99% and $4,600 of pro forma debt at an assumed rate of 6.37%
under the Credit Facilities. Under the Credit Facilities, one third of the
amount outstanding will be due during the first year and is classified as
current debt.
(11) Book value per share is calculated as the total shareholder's equity
divided by the number of shares outstanding at the end of the period.
22
<PAGE>
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
TEN's purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and is likely to reduce the number of
holders of Shares. Nonetheless, TEN and CTG anticipate that there will still be
a sufficient number of Shares outstanding and publicly traded following the
Offer to ensure a continued trading market in the Shares. Based on the published
guidelines of the New York Stock Exchange, TEN and CTG do not believe that TEN's
purchase of Shares pursuant to the Offer will cause CTG's remaining Shares to be
delisted from such exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. TEN believes that, following the
repurchase of Shares pursuant to the Offer, the Shares will continue to be
"margin securities" for purposes of the Federal Reserve Board's margin
regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that CTG furnish certain information to its shareholders and the
Commission and comply with the Commission's proxy rules in connection with
meetings of CTG's shareholders. TEN and CTG believe that TEN's purchase of
Shares pursuant to the Offer will not result in the Shares becoming eligible for
deregistration under the Exchange Act.
Shareholders who determine not to accept the Offer or whose Shares are not
purchased in the Offer will realize an increase in their percentage ownership
interest in the common equity of CTG and, thus, in CTG's future earnings and
assets. Because of the smaller number of Shares outstanding after consummation
of the Offer, increases or decreases in net earnings will result in
proportionately greater increases or decreases in earnings per Share. See
Section 8.
NEITHER TEN, CTG NOR ANY OF THEIR SUBSIDIARIES OR ANY OF THEIR DIRECTORS,
OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER
TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION
AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT
PRICE.
TEN HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF TEN, CTG OR ANY OF THEIR
SUBSIDIARIES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
13. REGULATORY APPROVALS.
Neither TEN, CTG nor any of their subsidiaries is aware of any approval or
other action by any government or governmental, administrative or regulatory
authority or agency that would be required for TEN's acquisition of Shares as
contemplated by the Offer or of any license or regulatory approval that appears
to be material to the business of CTG or any of its subsidiaries (including TEN)
that might be adversely affected by its acquisition of Shares as contemplated in
the Offer. Should any such approval or other action be required, TEN currently
contemplates that it will seek such approval or other action. TEN cannot predict
whether it may determine that it is required to delay the acceptance of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or action, if
needed, would be obtained or would be obtained without substantial conditions or
that the failure to obtain any such approval or other action might not result in
adverse consequences to the business of CTG or any of its subsidiaries
(including TEN).
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
IN GENERAL. The following summary is a general discussion of certain United
States federal income tax consequences relating to the Offer. This summary does
not discuss any aspects of state, local, foreign or other tax laws that may be
applicable to a shareholder of CTG. The summary is based on the Internal
23
<PAGE>
Revenue Code of 1986, as amended (the "Code"), existing final, temporary and
proposed Treasury Regulations promulgated thereunder, administrative rulings and
practices of the Internal Revenue Service ("IRS"), and judicial decisions, all
as in effect on the date hereof and all of which are subject to change possibly
with retroactive effect. The summary deals only with Shares held as capital
assets within the meaning of Section 1221 of the Code and does not address tax
consequences that may be relevant to investors subject to special treatment
under the United States federal income tax laws, such as certain financial
institutions, tax-exempt organizations, insurance companies, broker-dealers in
securities or currencies, shareholders who acquired their Shares upon the
exercise of options or otherwise as compensation, or shareholders holding the
Shares as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for federal income tax purposes.
Neither TEN nor CTG will seek a ruling from the IRS with regard to the tax
matters discussed below. Accordingly, each shareholder should consult its own
tax advisor with regard to the Offer and the application of the United States
federal income tax laws, as well as the laws of any state, local or foreign
taxing jurisdiction, to its particular situation.
CHARACTERIZATION OF THE SALE. A sale of Shares by a shareholder of CTG
pursuant to the Offer will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under any applicable
state, local and foreign tax laws. The United States federal income tax
consequences of such sale to a shareholder may vary depending upon the
shareholder's particular facts and circumstances. Under Sections 302 and 304 of
the Code, a sale of Shares by a shareholder to TEN pursuant to the Offer will be
treated as a "sale or exchange" of such Shares for United States federal income
tax purposes (rather than as a deemed distribution by CTG with respect to Shares
continued to be held (or deemed to be held) by the tendering shareholder) if the
receipt of cash upon such sale (i) is "substantially disproportionate" with
respect to the shareholder, (ii) results in a "complete termination" of the
shareholder's interest in CTG, or (iii) is "not essentially equivalent to a
dividend" with respect to the shareholder. These tests (the "Section 302 tests")
are explained more fully below.
If any of the Section 302 tests is satisfied, and the sale of the tendered
Shares is therefore treated as a "sale or exchange" of such Shares for United
States federal income tax purposes, the tendering shareholder will recognize
capital gain or loss equal to the difference between the amount of cash received
by the shareholder pursuant to the Offer and the shareholder's adjusted tax
basis in the Shares sold pursuant to the Offer. As a result of changes made by
the Taxpayer Relief Act of 1997, any such gain or loss recognized by
individuals, trusts or estates will be long-term capital gain or loss, subject
to a maximum 20% tax rate, if the Shares have been held for more than eighteen
months. Any such gain or loss will be mid-term capital gain or loss, subject to
a maximum 28% tax rate, if the Shares have been held for more than one year but
not more than eighteen months.
If none of the Section 302 tests is satisfied, then, to the extent, first,
of TEN's current and accumulated earnings and profits and, second, of CTG's
current and accumulated earnings and profits, the tendering shareholder will be
treated as having received a dividend taxable as ordinary income in an amount
equal to the entire amount of cash received by the shareholder pursuant to the
Offer (without reduction for the adjusted tax basis of the Shares sold pursuant
to the Offer), no loss will be recognized, and (subject to reduction as
described below for corporate shareholders eligible for the dividends-received
deduction) the tendering shareholder's adjusted tax basis in the Shares sold
pursuant to the Offer will be added to such shareholder's adjusted tax basis in
its remaining Shares, if any. No assurance can be given that any of the Section
302 tests will be satisfied as to any particular shareholder, and thus no
assurance can be given that any particular shareholder will not be treated as
having received a dividend taxable as ordinary income. If the sale of Shares by
a shareholder is not treated as a sale or exchange for federal income tax
purposes, any cash received for Shares pursuant to the Offer in excess of the
current and accumulated earnings and profits of TEN and CTG will be treated,
first, as a nontaxable return of capital to the extent of the shareholder's
adjusted tax basis in such shareholder's Shares, and, thereafter, as taxable
capital gain, to the extent the cash received exceeds such basis.
24
<PAGE>
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the Section
302 tests is satisfied, shareholders must take into account not only the Shares
which are actually owned by the shareholder, but also Shares which are
constructively owned by the shareholder by reason of the attribution rules
contained in Section 318 of the Code, as modified by Section 304 of the Code.
Under Section 318 of the Code, as so modified, a shareholder may be treated as
owning (i) Shares that are actually owned, and in some cases constructively
owned, by certain related individuals or entities in which the shareholder owns
an interest, or, in the case of shareholders that are entities, by certain
individuals or entities that own an interest in the shareholder, and (ii) Shares
which the shareholder has the right to acquire by exercise of an option or a
conversion right contained in another instrument held by the shareholder.
Contemporaneous dispositions or acquisitions of Shares by a shareholder or
related individuals or entities may be deemed to be part of a single integrated
transaction which will be taken into account in determining whether any of the
Section 302 tests has been satisfied in connection with Shares sold pursuant to
the Offer. EACH SHAREHOLDER SHOULD BE AWARE THAT BECAUSE PRORATION MAY OCCUR IN
THE OFFER, EVEN IF ALL THE SHARES ACTUALLY AND CONSTRUCTIVELY OWNED BY A
SHAREHOLDER ARE TENDERED PURSUANT TO THE OFFER, FEWER THAN ALL OF SUCH SHARES
MAY BE PURCHASED BY TEN. THUS, PRORATION MAY AFFECT WHETHER A SALE BY A
SHAREHOLDER PURSUANT TO THE OFFER WILL MEET ANY OF THE SECTION 302 TESTS.
SECTION 302 TESTS. One of the following tests must be satisfied in order
for the sale of Shares pursuant to the Offer to be treated as a sale or exchange
for federal income tax purposes.
a. SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash by a
shareholder will be "substantially disproportionate" if the percentage of
the outstanding Shares actually and constructively owned by the shareholder
immediately following the sale of Shares pursuant to the Offer (treating as
not being outstanding all Shares purchased pursuant to the Offer) is less
than 80% of the percentage of the outstanding Shares actually and
constructively owned by such shareholder immediately before the sale of
Shares pursuant to the Offer (treating as outstanding all Shares purchased
pursuant to the Offer). Shareholders should consult their own tax advisors
with respect to the application of the "substantially disproportionate" test
to their particular situation and circumstances.
b. COMPLETE TERMINATION TEST. The receipt of cash by a shareholder
will be a "complete termination" of the shareholder's interest in CTG if
either (i) all of the Shares actually and constructively owned by the
shareholder are sold pursuant to the Offer, or (ii) all of the Shares
actually owned by the shareholder are sold pursuant to the Offer and, with
respect to the Shares constructively owned by the shareholder which are not
sold pursuant to the Offer, the shareholder is eligible to waive (and
effectively waives) constructive ownership of all such Shares under
procedures described in Section 302(c) of the Code. Shareholders considering
making such a waiver should do so in consultation with their own tax
advisors.
c. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. Even if the receipt
of cash by a shareholder fails to satisfy the "substantially
disproportionate" test and the "complete termination" test, a shareholder
may nevertheless satisfy the "not essentially equivalent to a dividend" test
if the shareholder's sale of Shares pursuant to the Offer results in a
"meaningful reduction" in the shareholder's proportionate interest in CTG.
Whether the receipt of cash by a shareholder who sells shares pursuant to
the Offer will be "not essentially equivalent to a dividend" will depend
upon the shareholder's particular facts and circumstances. The IRS has
indicated in published Revenue Rulings that even a small reduction in the
proportionate interest of a small minority shareholder in a publicly held
corporation who exercises no control over corporate affairs may constitute
such a "meaningful reduction." The IRS held, for example, in Rev. Rul.
76-385, 1976-2 C.B. 92, that a reduction in the percentage ownership
interest of a shareholder in a publicly held corporation from .0001118% to
.0001081% (a reduction of only 3.3% in the shareholder's prior percentage
ownership interest) would constitute a "meaningful reduction." Shareholders
expecting to rely on the "not essentially equivalent
25
<PAGE>
to a dividend" test should consult their own tax advisors as to its
application to their particular situation and circumstances.
CORPORATE SHAREHOLDER DIVIDEND TREATMENT. If a sale of Shares pursuant to
the Offer by a corporate shareholder is treated as a dividend, the corporate
shareholder may be entitled to claim a deduction in an amount equal to 70% of
the gross dividend under Section 243 of the Code, subject to applicable
limitations. Corporate shareholders should consider the effect of Section 246(c)
of the Code, which disallows the 70% dividends-received deduction with respect
to any dividend on any share of stock that is held for 45 days or less during
the 90-day period beginning on the date which is 45 days before the date on
which such share becomes ex-dividend with respect to such dividend. For this
purpose, the length of time a taxpayer is deemed to have held stock may be
reduced by periods during which the taxpayer's risk of loss with respect to the
stock is diminished by reason of the existence of certain options or other
hedging transactions. Moreover, under Section 246A of the Code, if a corporate
shareholder has incurred indebtedness directly attributable to an investment in
Shares, the 70% dividends-received deduction may be reduced by a percentage
generally computed based on the amount of such indebtedness and the
shareholder's total adjusted tax basis in the Shares.
In addition, as a result of changes made by the Taxpayer Relief Act of 1997,
any amount received by a corporate shareholder pursuant to the Offer that is
treated as a dividend will constitute an "extraordinary dividend" under Section
1059 of the Code (except as may otherwise be provided in regulations yet to be
promulgated by the Treasury Department). Accordingly, a corporate shareholder
would be required under Section 1059(a) of the Code to reduce its adjusted tax
basis (but not below zero) in its Shares by the non-taxed portion of the
extraordinary dividend (i.e., the portion of the dividend for which a deduction
is allowed), and, if such portion exceeds the shareholder's adjusted tax basis
in its Shares, to treat the excess as gain from the sale of such Shares in the
year in which the dividend is received. These basis reduction and gain
recognition rules would be applied by taking account only of the shareholder's
adjusted tax basis in the Shares that were sold, without regard to other Shares
that the shareholder may continue to own. Corporate shareholders should consult
their own tax advisors as to the application of Section 1059 of the Code to the
Offer, and to any dividends which may be treated as paid with respect to Shares
sold pursuant to the Offer.
FOREIGN SHAREHOLDERS. TEN will withhold United States federal income tax at
a rate of 30% from the gross proceeds paid pursuant to the Offer to a foreign
shareholder or his agent, unless TEN determines that such foreign shareholder is
entitled to a reduced rate of withholding is pursuant to an applicable income
tax treaty or to an exemption from withholding because such gross proceeds are
effectively connected with the conduct of a trade or business by the foreign
shareholder within the United States. For this purpose, a foreign shareholder is
any shareholder of CTG that is not (i) a citizen or resident alien individual of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, any State or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States trustees have the
authority to control all substantial decisions relating to the trust.
Generally, the determination of whether a reduced rate of withholding is
available pursuant to an applicable income tax treaty is made by reference to a
foreign shareholder's address or to a properly completed IRS Form 1001 furnished
by the shareholder, and the determination of whether an exemption from
withholding is available on the ground that gross proceeds paid to a foreign
shareholder are effectively connected with a United States trade or business is
made on the basis of a properly completed IRS Form 4224 furnished by the
shareholder. TEN will determine a foreign shareholder's eligibility for a
reduced rate of, or exemption from, withholding by reference to the
shareholder's address and any IRS Forms 1001 or 4224 submitted to TEN by the
shareholder unless facts and circumstances indicate that such
26
<PAGE>
reliance is not warranted or unless applicable law requires some other method
for determining whether a reduced rate of withholding is applicable. These forms
can be obtained from TEN.
A foreign shareholder with respect to whom tax has been withheld may be
eligible for a refund from the IRS of all or a portion of the withheld tax if
the shareholder satisfies one of the Section 302 tests for capital gain
treatment or is otherwise able to establish that no tax or a reduced amount of
tax is due. Foreign shareholders are urged to consult their own tax advisors
regarding the application of United States federal income tax withholding,
including eligibility for a withholding tax reduction or exemption and details
of the refund procedure.
The procedures described above for United States federal income tax
withholding on proceeds paid pursuant to the Offer to a foreign shareholder are
currently the subject of proposed Treasury Regulations, which were issued in
1996 and are proposed to be effective for payments made after December 31, 1997,
subject to certain transition rules (the "1996 Proposed Regulations"). The 1996
Proposed Regulations, if adopted in their current form, would modify the
procedures for establishing a reduced rate of withholding tax as described
above. Under the 1996 Proposed Regulations, the determination of whether a
foreign shareholder is entitled to a reduced rate of withholding pursuant to an
applicable income tax treaty could no longer be determined solely by reference
to the foreign shareholder's address. Instead, a foreign shareholder who wishes
to claim the benefit of an applicable reduced treaty rate of withholding would
be required to satisfy certain certification and other requirements. Informal
statements by the IRS indicate that the 1996 Proposed Regulations, when finally
adopted, will be made effective for payments made after December 31, 1998. No
official announcement to this effect, however, has been issued by the IRS.
Foreign shareholders of CTG should consult their own tax advisors concerning the
potential adoption of the 1996 Proposed Regulations and the potential effect of
such Regulations on the United States federal income tax consequences to them of
the Offer.
BACKUP WITHHOLDING. See Section 3 with respect to the application of United
States federal income tax backup withholding.
THE SUMMARY DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE TAX CONSEQUENCES OF A SALE OF SHARES PURSUANT TO THE OFFER MAY VARY
DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR SITUATION AND CIRCUMSTANCES
OF THE TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE,
LOCAL OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SALES MADE
BY THEM PURSUANT TO THE OFFER, INCLUDING THE EFFECT OF THE STOCK OWNERSHIP
ATTRIBUTION RULES MENTIONED ABOVE.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
TEN expressly reserves the right, in its sole discretion and at any time or
from time to time, to extend the period of time during which the Offer is open
by giving oral or written notice of such extension to the Depositary and making
a public announcement thereof. There can be no assurance, however, that TEN will
exercise its right to extend the Offer. During any such extension, all Shares
previously tendered will remain subject to the Offer, except to the extent that
such Shares may be withdrawn as set forth in Section 4. TEN also expressly
reserves the right, in its sole discretion, (i) to terminate the Offer and not
accept for payment any Shares not theretofore accepted for payment or, subject
to Rule 13e-4(f)(5) under the Exchange Act, which requires TEN either to pay the
consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 6 hereof by giving oral
or written notice of such termination to the Depositary and making a public
announcement thereof and (ii) at any time or from time to time, to amend the
Offer in any respect. Amendments to the Offer may be effected by public
27
<PAGE>
announcement. Without limiting the manner in which TEN may choose to make public
announcement of any termination or amendment, TEN shall have no obligation
(except as otherwise required by applicable law) to publish, advertise or
otherwise communicate any such public announcement, other than by making a
release to the Dow Jones News Service, except in the case of an announcement of
an extension of the Offer, in which case TEN shall have no obligation to
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 a.m., Eastern
Standard Time, on the next business day after the previously scheduled
Expiration Date. Material changes to information previously provided to holders
of the Shares in this Offer or in documents furnished subsequent thereto will be
disseminated to holders of Shares in compliance with Rule 13e-4(e)(2)
promulgated under the Exchange Act.
If TEN materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, TEN
will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. The minimum period during which an offer
must remain open following material changes in the terms of the Offer or
information concerning the Offer (other than a change in price, change in
dealer's soliciting fee or change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. In a published release, the Commission has stated
that in its view, an offer should remain open for a minimum of five business
days from the date that notice of such a material change is first published,
sent or given. Pursuant to Rule 13e-4(f)(1), the Offer will continue or be
extended for at least ten business days from the time TEN publishes, sends or
gives to holders of Shares a notice that it will (a) increase or decrease the
price it will pay for Shares or the amount of the dealer's soliciting fee or (b)
increase (except for an increase not exceeding 2% of the outstanding Shares) or
decrease the number of Shares it seeks.
16. FEES AND EXPENSES.
PaineWebber Incorporated will act as Dealer Manager for TEN in connection
with the Offer. TEN has agreed to pay the Dealer Manager, upon acceptance for
payment of Shares pursuant to the Offer, a fee of $0.125 per Share purchased by
TEN pursuant to the Offer. The Dealer Manager will also be reimbursed by TEN for
its reasonable out-of-pocket expenses, including the reasonable fees and
expenses of its counsel, and will be indemnified against certain liabilities and
expenses, including liabilities under the federal securities laws, in connection
with the Offer.
The Dealer Manager has rendered, is currently rendering and is expected to
continue to render various investment banking and other advisory services to CTG
and its subsidiaries (including TEN). It has received, and will continue to
receive, customary compensation from CTG and its subsidiaries (including TEN)
for such services.
TEN has retained Chase Mellon Shareholder Services, L.L.C. as Depositary and
D.F. King & Co., Inc. as Information Agent in connection with the Offer. The
Information Agent may contact shareholders by mail, telephone, facsimile
transmission and personal interviews, and may request brokers, dealers and other
nominee shareholders to forward materials relating to the Offer to beneficial
owners. The Depositary and the Information Agent will receive reasonable and
customary compensation for their services and will also be reimbursed for
certain out-of-pocket expenses. TEN has agreed to indemnify the Depositary and
the Information Agent against certain liabilities, including certain liabilities
under the federal securities laws, in connection with the Offer. Neither the
Depositary nor the Information Agent has been retained to make solicitations or
recommendations in connection with the Offer.
Certain directors, officers or employees of TEN, CTG or their subsidiaries
may, from time to time, contact shareholders to provide them with information
regarding the Offer. Such directors, officers or employees will not make any
recommendation to any shareholder as to whether to tender all or any Shares
28
<PAGE>
and will not solicit the tender of any Shares. Neither TEN, CTG nor any of their
subsidiaries will compensate any director, officer or employee for this service.
TEN will not pay any solicitation fees to any broker, dealer, bank, trust
company or other person for any Shares purchased in connection with the Offer.
TEN will reimburse such persons for customary handling and mailing expenses
incurred in connection with the Offer.
TEN will pay all stock transfer taxes, if any, payable on account of the
acquisition of the Shares by TEN pursuant to the Offer, except in certain
circumstances where special payment or delivery procedures are utilized pursuant
to Instruction 7 of the Letter of Transmittal.
17. MISCELLANEOUS.
CTG has been subject to the informational requirements of the Exchange Act
since March 31, 1997 and in accordance therewith files reports, proxy statements
and other information with the Commission relating to its business, financial
condition and other matters. Prior to March 31, 1997, such reports, proxy
statements and other information were filed with the Commission by CNG; as a
result of the holding company reorganization, CNG is no longer required to file
such reports, proxy statements and other information pursuant to the Exchange
Act. Certain information as of particular dates concerning CTG's directors and
officers, their remuneration, options granted to them, the principal holders of
CTG's securities and any material interest of such persons in transactions with
CTG is filed with the Commission. CNG's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 and CTG's Report on Form 10-Q for the
quarter ended June 30, 1997 have been filed with the Commission. Copies of such
documents may be obtained as described below. In addition, TEN has filed an
Issuer Tender Offer Statement on Schedule 13E-4 with the Commission, which
includes certain additional information relating to the Offer. Such reports, as
well as such other material, may be inspected and copies may be obtained at the
Commission's public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549, and should also be available for inspection and copying at the
regional offices of the Commission located at 7 World Trade Center, 13th Floor,
New York, New York 10048, and Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. The Commission maintains a Web site that contains such reports,
and other information regarding registrants that file electronically with the
Commission. The address of such site is http:// www.sec.gov. Copies of such
material may be obtained by mail, upon payment of the Commission's customary
fees, from the Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, proxy statements and other information
also should be available for inspection at the office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. TEN's Schedule 13E-4 may
not be available at the Commission's regional offices.
The Offer is being made to all holders of Shares. TEN is not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to a valid state statute. If TEN becomes aware of any valid
state statute prohibiting the making of the Offer, TEN will make a good faith
effort to comply with such statute. If, after such good faith effort, TEN cannot
comply with such statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, holders of Shares in such state. In those
jurisdictions whose securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of TEN by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdictions.
THE ENERGY NETWORK, INC.
October 2, 1997
29
<PAGE>
SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
During the 40 business days prior to October 2, 1997, no executive officer
or director of TEN, CTG or any of their subsidiaries effected transactions in
the Shares, except through the DRIP or ESP.
Executive officers and directors of TEN, CTG and their subsidiaries
purchased an aggregate of 792 Shares through the reinvestment of dividends in
the DRIP.
In addition, executive officers and directors of TEN, CTG and their
subsidiaries purchased an aggregate of 503 shares through the ESP.
30
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted from Eligible
Institutions. The Letter of Transmittal and certificates for Shares should be
sent or delivered by each shareholder of CTG or his or her broker, dealer, bank
or trust company to the Depositary at one of its addresses set forth below.
THE DEPOSITARY:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND: BY MAIL: BY FACSIMILE: BY OVERNIGHT DELIVERY:
<S> <C> <C> <C>
Reorganization Department Reorganization Department (Eligible Institutions Only) Reorganization Department
120 Broadway P.O. Box 3305 (201) 329-8936 85 Challenger Road
13th Floor South Hackensack, NJ 07606 CONFIRM BY TELEPHONE: Mail Drop-Reorg.
New York, NY 10271 (201) 296-4860 Ridgefield Park, NJ 07660
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and addresses listed below.
Requests for additional copies of this Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to the Information
Agent and such copies will be furnished promptly at TEN's expense. Shareholders
may also contact their local broker, dealer, commercial bank or trust company
for assistance concerning the Offer.
THE INFORMATION AGENT:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Telephone: (800) 578-5378 (toll free)
(212) 269-5550 (call collect)
THE DEALER MANAGER:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
12th Floor
New York, New York 10019
Telephone: (800) 894-0098 (toll free)
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
CTG RESOURCES, INC.
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 2, 1997
BY
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY,
OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
TO: CHASE MELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY
<TABLE>
<S> <C> <C> <C>
BY HAND: BY MAIL: BY FACSIMILE: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department (Eligible Institutions Reorganization Department
120 Broadway P.O. Box 3305 Only) 85 Challenger Road
13th Floor South Hackensack, NJ 07606 (201) 329-8936 Mail Drop-Reorg.
New York, NY 10271 CONFIRM BY TELEPHONE: Ridgefield Park, NJ 07660
(201) 296-4860
</TABLE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER
OF SHARES
REPRESENTED NUMBER OF
CERTIFICATE BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
TOTAL SHARES:
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
<PAGE>
PLEASE READ THE ENTIRE LETTER
OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS,
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
Delivery of this instrument and all other documents to an address or
transmission of instructions to a facsimile number other than as set forth above
does not constitute a valid delivery.
This Letter of Transmittal is to be used only if (a) certificates for Shares
(as defined below) are to be forwarded herewith or (b) unless an Agent's Message
(as defined in Section 3 of the Offer to Purchase (as defined below)) is
utilized, a tender of Shares is being made concurrently by book-entry transfer
to the account maintained by the Depositary at The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (hereinafter,
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
Section 3 of the Offer to Purchase. See Instruction 2. This Letter of
Transmittal may be used for Shares credited to accounts in CTG's Dividend
Reinvestment Plan (the "Dividend Reinvestment Plan") (see box entitled "Dividend
Reinvestment Plan Shares") or CTG's Employee Savings Plans (the "Employee
Savings Plans") (see box entitled "Employee Savings Plans Shares").
Shareholders who cannot deliver the certificates for their Shares to the
Depositary prior to the Expiration Date (as defined in the Offer to Purchase) or
who cannot complete the procedure for book-entry transfer on a timely basis or
who cannot deliver a Letter of Transmittal and all other required documents to
the Depositary prior to the Expiration Date must, in each case, tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE A VALID DELIVERY.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
-------------------------------------------------------
Check Applicable Box: / / DTC / / PDTC
Account number: -------------------------------------------------------------------
Transaction Code Number: ---------------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
----------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------------------
Name of Institution which Guaranteed Delivery:
----------------------------------------
If Delivery is by Book-Entry Transfer:
Name of Tendering Institution:
-------------------------------------------------------
Account number: ---------------- / / DTC / / PDTC
Transaction Code Number:
------------------------------------------------------------
</TABLE>
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to The Energy Network, Inc., a Connecticut
corporation ("TEN") and a wholly owned subsidiary of CTG Resources, Inc., a
Connecticut corporation ("CTG"), the above described shares of Common Stock,
without par value (the "Shares"), of CTG pursuant to TEN's offer to purchase up
to 1,800,000 Shares, at the price per Share indicated in this Letter of
Transmittal, net to the seller in cash, upon the terms and subject to the
conditions set forth in TEN's Offer to Purchase, dated October 2, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged and in this Letter
of Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, TEN all right, title and interest in and to
all the Shares that are being tendered hereby and orders the registration of all
such Shares if tendered by book-entry transfer and hereby irrevocably
constitutes and appoints the Depositary as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Depositary
also acts as the agent of TEN) with respect to such Shares with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to:
(a) deliver certificate(s) for such Shares or transfer ownership of such
Shares on the account books maintained by any of the Book-Entry Transfer
Facilities, together in either such case with all accompanying evidence of
transfer and authenticity, to, or upon the order of, TEN upon receipt by the
Depositary, as the undersigned's agent, of the aggregate Purchase Price (as
defined below) with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on TEN's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, subject to the following representations and
warranties, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to TEN that:
(a) the undersigned has full power and authority to tender, sell, assign
and transfer the Shares tendered hereby;
(b) when and to the extent TEN accepts such Shares for purchase, TEN
will acquire good, marketable and unencumbered title to them, free and clear
of all security interests, liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to their sale or
transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or TEN deems necessary or desirable to complete the
assignment, transfer and purchase of the Shares tendered hereby;
(d) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute the undersigned's acceptance of the
terms and conditions of the Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Shares or equivalent
securities at least equal to the Shares tendered within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended; and
(ii) such tender of Shares complies with Rule 14e-4; and
3
<PAGE>
(e) the undersigned has read and agrees to all of the terms of the
Offer.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed
above, if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates, and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above. The price at which such Shares are being tendered should be indicated in
the box below.
The undersigned understands that TEN will, upon the terms and subject to the
conditions of the Offer, determine a single per Share price (not greater than
$27.00 or less than $23.50 per Share) net to the seller in cash (the "Purchase
Price") that it will pay for Shares properly tendered and not withdrawn prior to
the Expiration Date pursuant to the Offer, taking into account the number of
Shares so tendered and the prices (in multiples of $0.25) specified by tendering
shareholders. The undersigned understands that TEN will select the lowest
Purchase Price which will allow it to buy 1,800,000 Shares (or such lesser
number of Shares as are properly tendered at prices not greater than $27.00 or
less than $23.50 per Share) pursuant to the Offer. The undersigned understands
that up to 1,800,000, Shares properly tendered at prices at or below the
Purchase Price and not withdrawn prior to the Expiration Date will be purchased
at the Purchase Price, upon the terms and subject to the conditions of the
Offer, including its proration provisions, and that TEN will return all other
Shares not purchased pursuant to the Offer, including Shares tendered and not
withdrawn prior to the Expiration Date at prices greater than the Purchase Price
and Shares not purchased because of proration.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above). Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the Purchase Price of any Shares purchased and/ or any certificates for
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Payment Instructions" and "Special
Delivery Instructions" are completed, please issue the check for the Purchase
Price of any Shares purchased and/or return any Shares not tendered or not
purchased in the name(s) of, and mail said check and/or any certificates to, the
person(s) so indicated. The undersigned recognizes that TEN has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from the
name of the registered holder(s) thereof if TEN does not accept for payment any
of the Shares so tendered.
4
<PAGE>
THE UNDERSIGNED UNDERSTANDS THAT ACCEPTANCE OF SHARES BY TEN FOR
PAYMENT WILL CONSTITUTE A BINDING AGREEMENT BETWEEN THE UNDERSIGNED AND
TEN UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED
OR IF NO BOX IS CHECKED, THERE IS
NO VALID TENDER OF SHARES
SHARES TENDERED AT PURCHASE PRICE
DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having TEN purchase all the
Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share as low as
$23.50 or as high as $27.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
/ / $23.50 / / $24.50 / / $25.50 / /
$26.50
/ / $23.75 / / $24.75 / / $25.75 / /
$26.75
/ / $24.00 / / $25.00 / / $26.00 / /
$27.00
/ / $24.25 / / $25.25 / / $26.25
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, YOU MUST USE A SEPARATE
LETTER OF TRANSMITTAL FOR EACH PRICE TO BE SPECIFIED.
ODD LOTS
(SEE INSTRUCTION 8)
To be completed ONLY if the SHARES are being tendered by or on behalf of a
person owning of record or beneficially, as of the close of business on October
2, 1997, an aggregate of fewer than 100 Shares*. The undersigned either (check
one box):
/ / was as of the close of business on October 2, 1997, and will continue to be
at the Expiration Date, the record or beneficial owner, of an aggregate of
fewer than 100 Shares,* all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company, or other nominee that
(a) is tendering for the beneficial owner(s) thereof, Shares with respect to
which it is the record holder, and (b) believes, based upon representations
made to it by such beneficial owner(s), that each such person was as of the
close of business on October 2, 1997, and will continue to be at the
Expiration Date, the beneficial owner of an aggregate of fewer than 100
Shares* and is tendering all of such Shares.
* In calculating the number of Shares you own, you must aggregate Shares held
in the Dividend Reinvestment Plan or the Employee Savings Plans with those
held outside such plans.
5
<PAGE>
DIVIDEND REINVESTMENT PLAN SHARES
(SEE INSTRUCTION 13)
This section is to be completed ONLY if Shares held in the Dividend Reinvestment
Plan are to be tendered.
/ / By checking this box, the undersigned represents that the undersigned is a
participant in the Dividend Reinvestment Plan and hereby instructs the
Depositary to tender on behalf of the undersigned the following number of
Shares credited to the Dividend Reinvestment Plan account of the undersigned
at the Purchase Price per Share indicated in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of
Transmittal:
Number of Shares *
* THE UNDERSIGNED UNDERSTANDS AND AGREES THAT ALL SHARES HELD IN THE DIVIDEND
REINVESTMENT PLAN ACCOUNT(S) OF THE UNDERSIGNED WILL BE TENDERED IF THE
ABOVE BOX IS CHECKED AND THE SPACE ABOVE IS LEFT BLANK. IF THE BOX
CAPTIONED "ODD LOTS" IN THIS LETTER OF TRANSMITTAL IS COMPLETED, ALL SHARES
HELD IN THE ODD LOT OWNER'S ACCOUNT(S) WILL BE TENDERED REGARDLESS OF
WHETHER THIS SECTION IS OTHERWISE COMPLETED.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 4, 6, 7 AND 10)
To be completed ONLY if certificates for Shares not To be completed ONLY if certificates for Shares not
tendered or not purchased and/or any check for the tendered or not purchased and/or any check for the
aggregate Purchase Price of Shares purchased are to be Purchase Price of Shares purchased, issued in the name
issued in the name of and sent to someone other than the of the undersigned, are to be mailed to someone other
name of and sent to someone other than the undersigned. than the undersigned, or to the undersigned at an
Issue / / Check / / Certificates to: address other than that shown above.
Name(s) Issue / / Check / / Certificates to:
Address (Please Print) Name(s) (Please Print)
(Zip Code) Address
(Tax Identification or Social Security Number) (Zip Code)
</TABLE>
EMPLOYEE SAVINGS PLANS SHARES
(SEE INSTRUCTION 14)
This section is to be completed ONLY if unrestricted Shares held in the Employee
Savings Plans are to be tendered.
/ / By checking this box, the undersigned represents that the undersigned is a
participant in the Employee Savings Plans and hereby instructs the
Depositary to tender on behalf of the undersigned the following number of
unrestricted Shares credited to the Employee Savings Plans account of the
undersigned at the Purchase Price per Share indicated in the box entitled
"Price (In Dollars) Per Share At Which Shares Are Being Tendered" in this
Letter of Transmittal:
Number of Shares *
* THE UNDERSIGNED UNDERSTANDS AND AGREES THAT ALL UNRESTRICTED SHARES HELD IN
THE EMPLOYEE SAVINGS PLANS ACCOUNT(S) OF THE UNDERSIGNED WILL BE TENDERED
IF THE ABOVE BOX IS CHECKED AND THE SPACE ABOVE IS LEFT BLANK. IF THE BOX
CAPTIONED "ODD LOTS" IN THIS LETTER OF TRANSMITTAL IS COMPLETED, ALL
UNRESTRICTED SHARES HELD IN THE ODD LOT OWNER'S ACCOUNT(S) WILL BE TENDERED
REGARDLESS OF WHETHER THIS SECTION IS OTHERWISE COMPLETED.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 4, 6, 7 AND 10)
To be completed ONLY if certificates for Shares not To be completed ONLY if certificates for Shares not
tendered or not purchased and/or any check for the tendered or not purchased and/or any check for the
aggregate Purchase Price of Shares purchased are to be Purchase Price of Shares purchased, issued in the name
issued in the name of and sent to someone other than the of the undersigned, are to be mailed to someone other
name of and sent to someone other than the undersigned. than the undersigned, or to the undersigned at an
Issue / / Check / / Certificates to: address other than that shown above.
Name(s) Issue / / Check / / Certificates to:
Address (Please Print) Name(s) (Please Print)
(Zip Code) Address
(Tax Identification or Social Security Number) (Zip Code)
</TABLE>
6
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL SHAREHOLDERS)
Signature(s) of Owner(s)-- _____________________________________________________
________________________________________________________________________________
Signature(s) of Owner(s)
Dated: __________________________________________________________________, 1997.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: ________________________________________________
________________________________________________________________________________
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position or by person(s) authorized to become
registered holder(s) by certificate(s) and documents transmitted with this
Letter of Transmittal. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or another person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 6.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
________________________________________________________________________________
(Please Print)
Title: _________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: ________________________________________________
Dated: ___________________________________________________________________, 1997
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURE. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Shares (which term, for purposes of this document, shall include any participant
in a Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of such Shares) exactly as the name of the registered
holder appears on the certificate tendered with this Letter of Transmittal and
payment and delivery are to be made directly to such owner unless such owner has
completed either the box entitled "Special Payment Instructions" or "Special
Delivery Instructions" above; or
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company (not a savings
bank or savings and loan association) having an office, branch or agency in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (each such entity, an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates for
Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares or confirmation of
a book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares tendered electronically, together in each case with a
properly completed and duly executed Letter of Transmittal or duly executed and
manually signed photocopy of the Letter of Transmittal, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to the
Depositary at the appropriate address set forth on the front page of this Letter
of Transmittal and must be delivered to the Depositary on or before the
Expiration Date (as defined in the Offer to Purchase). DELIVERY OF DOCUMENTS TO
ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Shareholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
such case, tender their Shares by or through any Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery (or photocopy of it (with any required signature guarantee)) and by
otherwise complying with the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. Pursuant to such procedure, certificates for all
physically tendered Shares or book-entry confirmations, as the case may be, as
well as a properly completed and duly executed Letter of Transmittal (or
photocopy of it) and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three New York Stock Exchange trading
days after receipt by the Depositary of such Notice of Guaranteed Delivery, all
as provided in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be tendered validly pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery on or
before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY
8
<PAGE>
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
TEN will not accept any alternative, conditional or contingent tenders,
except as expressly provided in the Offer to Purchase. All fractional shares
will be purchased, unless proration of tendered Shares is required, in which
case only fractional Shares held by participants in the Dividend Reinvestment
Plan and unrestricted fractional shares held in the Employee Savings Plans will
be purchased. All tendering shareholders, by execution of this Letter of
Transmittal (or a photocopy of it), waive any right to receive any notice of the
acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares that are to be
tendered in the column entitled "Number of Shares Tendered," in the box
captioned "Description of Shares Tendered." In such case, if any tendered Shares
are purchased, a new certificate for the remainder of the Shares (including any
Shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s), unless otherwise specified in either the
"Special Payment Instructions" or "Special Delivery Instructions" box on this
Letter of Transmittal, as soon as practicable after the Expiration Date. Unless
otherwise indicated, all Shares represented by the certificate(s) listed and
delivered to the Depositary will be deemed to have been tendered.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be
properly tendered, the shareholder MUST check the box indicating the price per
Share at which he or she is tendering Shares under "Price (In Dollars) Per Share
at Which Shares Are Being Tendered" on this Letter of Transmittal. ONLY ONE BOX
MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE
IS NO PROPER TENDER OF SHARES. A shareholder wishing to tender portions of his
or her Share holdings at different prices must complete a separate Letter of
Transmittal for each price at which he or she wishes to tender each such portion
of his or her Shares. The same Shares cannot be tendered (unless previously
properly withdrawn as provided in Section 4 of the Offer to Purchase) at more
than one price. SHAREHOLDERS WISHING TO MAXIMIZE THE POSSIBILITY THAT THEIR
SHARES WILL BE PURCHASED AT THE RELEVANT PURCHASE PRICE MAY CHECK THE BOX ON THE
LETTER OF TRANSMITTAL MARKED "SHARES TENDERED AT PURCHASE PRICE DETERMINED BY
DUTCH AUCTION." Checking this box may result in a purchase price of the Shares
so tendered at the minimum price of $23.50.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, the signature(s) must correspond exactly with
name(s) as written on the face of the certificate(s) without any change
whatsoever.
(b) If the Shares are held of record by two or more persons or holders,
all such persons or holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or photocopies of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock power(s) are
required unless payment is to be made or the certificate(s) for Shares not
tendered or
9
<PAGE>
not purchased are to be issued to a person other than the registered
holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE GUARANTEED BY AN
ELIGIBLE INSTITUTION. If this Letter of Transmittal is signed by a person
other than the registered holder(s) of the certificate(s) listed, or if
payment is to be made or their certificate(s) for Shares not tendered or not
purchased are to be issued to a person other than the registered holder(s),
the certificate(s) must be endorsed or accompanied by appropriate stock
power(s), in either case signed exactly as the name(s) of the registered
holder(s) appears on the certificate(s), and the signature(s) on such
certificate(s) or stock power(s) must be guaranteed by an Eligible
Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock
power(s) are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing and
must submit proper evidence satisfactory to TEN of their authority so to
act. If the certificate has been issued in the fiduciary or representative
capacity, no additional documentation will be required.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. TEN will pay or cause to be paid any stock transfer taxes payable
on the transfer to it of Shares purchased pursuant to the Offer. If, however:
(a) payment of the aggregate Purchase Price for Shares tendered hereby
and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be
registered in the name(s) of any person(s) other than the registered
holder(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal,
then the Depositary will deduct from such aggregate Purchase Price the amount of
any stock transfer taxes (whether imposed on the registered holder, such other
person or otherwise) payable on account of the transfer to such person, unless
satisfactory evidence of the payment of such taxes or any exemption from them is
submitted. See Section 16 of the Offer to Purchase.
8. ODD LOTS. As described in Sections 1 and 2 of the Offer to Purchase, if
TEN is to purchase fewer than all Shares tendered before the Expiration Date and
not withdrawn, the Shares purchased first will consist of all Shares tendered by
any shareholder who owned of record or owned beneficially, as of the close of
business on October 2, 1997 and will continue to own at the Expiration Date, an
aggregate of fewer than 100 Shares, including any Shares held in the Dividend
Reinvestment Plan or the Employee Savings Plans, and who tenders all of his or
her Shares at or below the Purchase Price (an "Odd Lot Owner"). This preference
will not be available unless the box captioned "Odd Lots" is completed.
Notwithstanding clause (b) above, TEN reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer than 100 Shares. If TEN exercises this right, it
will increase the number of Shares that are purchased pursuant to the Offer in
an amount sufficient to allow the exercise of the right (i.e., the number of
Shares that would be owned by all shareholders who would become Odd Lot holders
as a result of the proration contemplated by clause (b)).
9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the federal income tax classification of any gain or loss on
the Shares purchased. See Section 14 of the Offer to Purchase.
10
<PAGE>
10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/ or check(s) are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1. Shareholders
tendering Shares by book-entry transfer will have any Shares not accepted for
payment returned by crediting the account maintained by such Shareholder at the
Book-Entry Transfer Facility from which such transfer was made.
11. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by TEN in its sole discretion, which determinations shall be
final and binding on all parties. TEN reserves the absolute right to reject any
or all tenders of Shares it determines not to be in proper form or the
acceptance of which or payment for which may, in the opinion of TEN's counsel,
be unlawful. TEN also reserves the absolute right to waive any of the conditions
of the Offer and any defect or irregularity in the tender of any particular
Shares, and TEN's interpretation of the terms of the Offer (including these
instructions) will be final and binding on all parties. No tender of Shares will
be deemed to be properly made until all defects and irregularities have been
cured or waived. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as TEN shall determine. None of TEN, CTG,
the Dealer Manager, the Depositary, the Information Agent, (all as defined in
the Offer to Purchase) or any other person is or will be obligated to give
notice of any defects or irregularities in tenders and none of them will incur
any liability for failure to give any such notice.
12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the addresses and
telephone numbers set forth at the end of this Letter of Transmittal or from
your broker, dealer, commercial bank or trust company.
13. DIVIDEND REINVESTMENT PLAN. If a tendering shareholder desires to have
tendered pursuant to the Offer Shares credited to the shareholder's account
under the Dividend Reinvestment Plan, the box captioned "Dividend Reinvestment
Plan Shares" should be completed. A participant in the Dividend Reinvestment
Plan may complete such box on only one Letter of Transmittal submitted by such
participant. If a participant submits more than one Letter of Transmittal and
completes such box on more than one Letter of Transmittal, the participant will
be deemed to have elected to tender all shares credited to the shareholder's
account under the Dividend Reinvestment Plan at the lowest of the prices
specified in such Letters of Transmittal.
If a Shareholder authorizes a tender of Shares held in the Dividend
Reinvestment Plan, all such Shares credited to such shareholder's account,
including fractional Shares, will be tendered, unless otherwise specified in the
appropriate space in the box entitled "Dividend Reinvestment Plan Shares." In
the event that the box captioned "Dividend Reinvestment Plan Shares" is not
completed, no Shares held in the tendering shareholder's account will be
tendered (unless the stockholder has otherwise completed the box captioned "Odd
Lots" in this Letter of Transmittal, in which case all Shares held in the Odd
Lot Owner's account will be tendered regardless of whether the box captioned
"Dividend Reinvestment Plan Shares" is completed).
14. EMPLOYEE SAVINGS PLANS. If a tendering shareholder desires to have
tendered pursuant to the Offer unrestricted Shares credited to the shareholder's
account under the Employee Savings Plans, the box captioned "Employee Savings
Plans Shares" should be completed. A participant in the Employee Savings Plans
may complete such box on only one Letter of Transmittal submitted by such
participant. If a
11
<PAGE>
participant submits more than one Letter of Transmittal and completes such box
on more than one Letter of Transmittal, the participant will be deemed to have
elected to tender all unrestricted Shares credited to the shareholder's account
under the Employee Savings Plans at the lowest of the prices specified in such
Letters of Transmittal.
If a Shareholder authorizes a tender of unrestricted Shares held in the
Employee Savings Plans, all such unrestricted Shares credited to such
shareholder's account, including fractional unrestricted Shares, will be
tendered, unless Otherwise specified in the appropriate space in the box
entitled "Employee Savings Plans Shares." In the event that the box captioned
"Employee Savings Plans Shares" is not completed, no unrestricted Shares held in
the tendering shareholder's account will be tendered (unless the stockholder has
otherwise completed the box captioned "Odd Lots" in this Letter of Transmittal,
in which case all unrestricted Shares held in the Odd Lot Owner's account will
be tendered regardless of whether the box captioned "Employee Savings Plans
Shares" is completed).
15. SUBSTITUTE FORM W-9 AND FORM W-8. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
shareholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Treasury, unless the shareholder or other payee provides
such person's taxpayer identification number (employer identification number or
social security number) to the Depositary and certifies that such number is
correct. Therefore, each tendering shareholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup withholding,
unless such shareholder otherwise establishes to the satisfaction of the
Depositary that it is not subject to backup withholding. Certain shareholders
(including, among others, all corporations and certain foreign shareholders (in
addition to foreign corporations)) are not subject to these backup withholding
and information reporting requirements. In order for a foreign shareholder to
qualify as an exempt recipient, that shareholder must submit to the Depositary
an IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
certifying as to that shareholder's non-United States status. Such statements
may be obtained from the Depositary.
16. WITHHOLDING ON FOREIGN SHAREHOLDERS. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold United States federal income taxes in an amount equal to 30% of
the gross proceeds payable to a foreign shareholder or his or her agent unless
the Depositary determines that such foreign shareholder is entitled to a reduced
rate of withholding pursuant to an applicable income tax treaty or to an
exemption from withholding because such gross proceeds are effectively connected
with the conduct by such Shareholder of a trade or business in the United
States. For this purpose, a foreign shareholder is any shareholder of CTG that
is not (i) a citizen or resident alien individual of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States, any State or any political subdivision thereof, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of the source of such income, or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States trustees have the
authority to control all substantial decisions relating to the trust. In order
to obtain a reduced rate of withholding pursuant to an applicable tax treaty, a
foreign shareholder must deliver to the Depositary a properly completed IRS Form
1001. In order to obtain an exemption from withholding on the ground that the
gross proceeds paid pursuant to the Offer are effectively connected with the
conduct of a trade or business within the United States, a foreign shareholder
must deliver to the Depositary a properly completed IRS Form 4224. The
Depositary will determine a shareholder's status as a foreign shareholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the shareholder's address and any IRS Forms 1001 or 4224 submitted
to TEN by the shareholder unless facts and circumstances indicate that such
reliance is not warranted or unless applicable law requires some other method
for determining whether a reduced rate of withholding is applicable. These forms
can be obtained from TEN. A foreign shareholder may be eligible for a refund
from the IRS of all or a portion of any tax withheld if such shareholder
satisfies the
12
<PAGE>
"complete termination," "substantially disproportionate" or "not essentially
equivalent to a dividend" test described in Section 14 of the Offer to Purchase
or is otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to withholding at
the 30% or a treaty-reduced rate. Foreign shareholders are urged to consult
their tax advisors regarding the application of United States federal income tax
withholding, including eligibility for a withholding tax reduction or exemption
and details of the refund procedures.
The procedures described above for United States federal income tax
withholding on proceeds paid pursuant to the Offer to a foreign shareholder are
currently the subject of proposed Treasury Regulations, which were issued in
1996 and are proposed to be effective for payments made after December 31, 1997,
subject to certain transition rules (the "1996 Proposed Regulations"). The 1996
Proposed Regulations, if adopted in their current form, would modify the
procedures for establishing a reduced rate of withholding tax as described
above. Under the 1996 Proposed Regulations, the determination of whether a
foreign shareholder is entitled to a reduced rate of withholding pursuant to an
applicable income tax treaty could no longer be determined solely by reference
to the foreign shareholder's address. Instead, a foreign shareholder who wishes
to claim the benefit of an applicable reduced treaty rate of withholding would
be required to satisfy certain certification and other requirements. Informal
statements by the IRS indicate that the 1996 Proposed Regulations, when finally
adopted, will be made effective for payments made after December 31, 1998. No
official announcement to this effect, however, has been issued by the IRS.
Foreign shareholders of CTG should consult their own tax advisors concerning the
potential adoption of the 1996 Proposed Regulations and the potential effect of
such Regulations on the United States federal income tax consequences to them of
the Offer.
13
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY THEREOF) TOGETHER WITH
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE). SHAREHOLDERS ARE ENCOURAGED TO RETURN A
COMPLETED SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASE MELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY
SUBSTITUTE PART 1: PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER
FORM W-9 TIN IN THE BOX AT RIGHT AND OR
CERTIFY BY SIGNING AND DATING EMPLOYER IDENTIFICATION
BELOW. NUMBER
PART 2: For Payees exempt from backup withholding, see the
DEPARTMENT OF THE TREASURY enclosed Guidelines for Certification of Taxpayer
INTERNAL REVENUE SERVICE Identification
PAYER'S REQUEST FOR Number on Substitute Form W-9 and complete as instructed
TAXPAYER IDENTIFICATION therein.
NUMBER (TIN)
PART 3: Awaiting TIN / /
</TABLE>
CERTIFICATION--Under penalties of perjury, I certify that (i) the number shown
on this form is my correct Taxpayer Identification Number (or if I am waiting
for a number to be issued to me either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate IRS
center or Social Security Administration office or (b) I intend to mail or
deliver an application in the near future) and (ii) I am not subject to backup
withholding because: (a) I am exempt from backup withholding; or (b) I have not
been notified by the IRS that I am subject to backup withholding as a result of
a failure to report all interest or dividends; or (c) the IRS has notified me
that I am no longer subject to backup withholding. Certification
Instructions--You must cross out item (ii) above if you have been notified by
the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
SIGNATURE _______________________________ DATE ________________________, 1997
NAME ___________________________________________________________________________
(PLEASE PRINT)
ADDRESS ________________________________________________________________________
(INCLUDE ZIP CODE)
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
14
<PAGE>
THE INFORMATION AGENT:
D.F. KING & CO., INC.
77 Water Street New York, New York 10005
Telephone: (800) 578-5378 (toll free) or
(212) 269-5550 (call collect)
THE DEPOSITARY:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND: BY MAIL: BY FACSIMILE: BY OVERNIGHT DELIVERY:
<S> <C> <C> <C>
Reorganization Department Reorganization Department (Eligible Institutions Only) Reorganization Department
120 Broadway P.O. Box 3305 (201) 329-8936 85 Challenger Road
13th Floor South Hackensack, NJ 07606 CONFIRM BY TELEPHONE: Mail Drop-Reorg.
New York, NY 10271 (201) 296-4860 Ridgefield Park, NJ 07660
</TABLE>
THE DEALER MANAGER:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
12th Floor
New York, New York 10019
Telephone: (800) 894-0098 (toll free)
Important: This Letter of Transmittal or a photocopy hereof or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal (together with certificates for the Shares being tendered
and all other required documents), or a Notice of Guaranteed Delivery
must be received by the Depositary prior to 12:00 Midnight, Eastern
Standard Time, on the Expiration Date.
<PAGE>
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
NOTICE OF GUARANTEED DELIVERY OF SHARES OF
COMMON STOCK OF CTG RESOURCES, INC.
This form or a photocopy hereof must be used to accept the Offer (as defined
below) if:
(a) certificates for shares of Common Stock, without par value (the
"Shares"), of CTG Resources, Inc. cannot be delivered to the Depositary
prior to the Expiration Date (as defined in Section 1 of The Energy
Network, Inc.'s Offer to Purchase dated October 2, 1997 (the "Offer to
Purchase")); or
(b) the procedures for book-entry transfer (set forth in Section 3 of
the Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a photocopy thereof) and all other
required documents cannot be delivered to the Depositary prior to the
Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or overnight courier or (for Eligible Institutions only) by facsimile
transmission to the Depositary. See Section 3 of the Offer to Purchase.
THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND
CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE
TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
TO: CHASE MELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY
<TABLE>
<CAPTION>
BY HAND: BY MAIL: BY FACSIMILE: BY OVERNIGHT DELIVERY:
<S> <C> <C> <C>
Reorganization Department Reorganization Department (Eligible Institutions Only) Reorganization Department
120 Broadway P.O. Box 3305 (201) 329-8936 85 Challenger Road
13th Floor South Hackensack, NJ 07606 CONFIRM BY TELEPHONE: Mail Drop-Reorg.
New York, NY 10271 (201) 296-4860 Ridgefield Park, NJ 07660
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to The Energy Network, Inc. ("TEN") at the
price per Share indicated in this Notice of Guaranteed Delivery, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated October
2, 1997, and the related Letter of Transmittal (which together constitute the
"Offer"), receipt of both of which is hereby acknowledged, the number of shares
of common stock, without par value (the "Shares") of CTG Resources, Inc. listed
below, pursuant to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES. SHAREHOLDERS WHO DESIRE
TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE A
SEPARATE ELECTION FORM FOR EACH PRICE AT
WHICH SHARES ARE TENDERED.
SHARES TENDERED AT PRICE
DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having TEN purchase all the
Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share as low as
$23.50 or as high as $27.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
<TABLE>
<S> <C> <C> <C>
/ / $23.50 / / $24.50 / / $25.50 / / $26.50
/ / $23.75 / / $24.75 / / $25.75 / / $26.75
/ / $24.00 / / $25.00 / / $26.00 / / $27.00
/ / $24.25 / / $25.25 / / $26.25
</TABLE>
2
<PAGE>
ODD LOTS
To be completed ONLY if the Shares are being tendered by or on behalf of a
person owning of record or beneficially, as of the close of business on October
2, 1997, an aggregate of fewer than 100 Shares.*
The undersigned either (check one):
/ / was as of the close of business on October 2, 1997, and will continue
to be at the Expiration Date, the record or beneficial owner, of an
aggregate of fewer than 100 Shares,* all of which are being tendered,
or
/ / is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was as of the close of business on October 2, 1997, and will
continue to be at the Expiration Date, the beneficial owner of an
aggregate of fewer than 100 Shares* and is tendering all of such
Shares.
* In calculating the number of Shares you own, you must aggregate Shares held
in the Dividend Reinvestment Plan or Shares held in the Employee Savings
Plans with those held outside such plans.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(Please type or print) SIGN HERE
NUMBER OF SHARES:
Certificate Nos. (if available):
- ------------------------------------------------------- -------------------------------------------------------
- ------------------------------------------------------- Signature(s)
Name(s) -------------------------------------------------------
- ------------------------------------------------------- Signature(s)
Name(s) Dated:
- ------------------------------------------------------- If Shares will be tendered by book-entry transfer, check
Address(s) one box:
- ------------------------------------------------------- / / The Depository Trust Company
- ------------------------------------------------------- / / The Philadelphia Depository Company
Area Code(s) and Telephone Number(s) Account Number
</TABLE>
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned is a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch, or agency in the
United States and guarantees: (a) that the above-named person(s) has a net long
position in the Shares (and associated Rights) tendered hereby within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, (b) that such tender of Shares complies with such Rule 14e-4, and (c)
guarantees that the Depositary will receive (i) certificates of the Shares
tendered hereby in proper form for transfer, or (ii) confirmation that the
Shares tendered hereby have been delivered pursuant to the procedure for
book-entry transfer (set forth in Section 3 of the Offer to Purchase) into the
Depositary's account at The Depository Trust Company or The Philadelphia
Depository Company, in each case, together with a properly completed and duly
executed Letter of Transmittal (or photocopy thereof) and any other documents
required by the Letter of Transmittal, all within three New York Stock Exchange
trading days after the date the Depositary receives this Notice of Guaranteed
Delivery.
Authorized Signature: __________________________________________________________
________________________________________________________________________________
Name: __________________________________________________________________________
(Please Print)
Title: _________________________________________________________________________
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________________
(Including Zip Code)
Area Code and
Telephone Number: ______________________________________________________________
________________________________________________________________________________
Date: __________________________________________________________________________
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM, YOUR STOCK CERTIFICATES MUST
BE SENT WITH THE LETTER OF TRANSMITTAL.
4
<PAGE>
[LOGO]
[LOGO]
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,800,000 SHARES OF CTG RESOURCES, INC. COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $27.00
OR LESS THAN $23.50 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY, OCTOBER 30, 1997,
UNLESS THE OFFER IS EXTENDED
October 2, 1997
TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by The Energy Network, Inc. ("TEN"), a wholly owned
subsidiary of CTG Resources, Inc. ("CTG"), to act as Dealer Manager (the "Dealer
Manager") in connection with TEN's offer to purchase up to 1,800,000 shares of
the Common Stock, without par value (the "Shares"), of CTG, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated October 2,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer"). We are asking you to contact your clients for
whom you hold Shares registered in your name (or in the name of your nominee) or
who hold Shares registered in their own names. Please bring the Offer to their
attention as promptly as possible. Please furnish copies of the enclosed
materials to those of your clients for whom you hold Shares registered in your
name.
TEN invites the shareholders of CTG to tender up to 1,800,000 Shares at
prices not in excess of $27.00 or less than $23.50 net per share in cash,
specified by shareholders tendering their Shares upon the terms and subject to
the conditions set forth in the Offer. TEN will determine a single price (not
greater than $27.00 or less than $23.50 per Share) that it will pay for Shares
validly tendered pursuant to the Offer (the "Purchase Price"), taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. TEN will select the lowest Purchase Price that will enable it to
purchase 1,800,000 Shares (or such lesser number of Shares as are validly
tendered) pursuant to the Offer. TEN will purchase up to 1,800,000 Shares
validly tendered at prices at or below the Purchase Price and not withdrawn,
upon the terms and subject to the conditions of the Offer, including the
provisions relating to proration described in the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller, with respect to
all Shares purchased. Shares tendered at prices in excess of the Purchase Price
and Shares not purchased because of proration or invalid tenders will be
returned to the tendering shareholder at TEN's expense as promptly as
practicable following the Expiration Date (as defined in the Offer to Purchase).
See Section 1 of the Offer to Purchase.
<PAGE>
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. The Offer is, however, subject to other conditions. See Section 6 of
the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. The Offer to Purchase, dated October 2, 1997.
2. The Letter of Transmittal for your use and for the information of
your clients.
3. A letter to shareholders of CTG from the Chairman of the Board and
Chief Executive Officer of CTG.
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for the Shares are not immediately available or the procedure
for book-entry transfer cannot be completed on a timely basis or if time
will not permit all required documents to be delivered to the Depositary by
the Expiration Date (as defined in the Offer to Purchase).
5. A letter that may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space for obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding.
7. A return envelope addressed to Chase Mellon Shareholder Service,
L.L.C., the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS
EXTENDED.
TEN will not pay any fees or commissions to any broker or dealer or any
other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. TEN will however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs incurred by them in forwarding the Offer to
Purchase and related documents to the beneficial owners of Shares held by them
as nominee or in a fiduciary capacity. TEN will pay all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 7 of the Letter of Transmittal.
As described in the Offer to Purchase, if more than 1,800,000 Shares have
been validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase,
TEN will purchase Shares in the following order of priority: (a) all Shares
validly tendered at or below the Purchase Price and not withdrawn on or prior to
the Expiration Date by any shareholder who was as of the close of business on
October 2, 1997, and will continue to be at the Expiration Date, the beneficial
owner of an aggregate of fewer than 100 Shares (an "Odd Lot Owner") (including
any Shares held in the Dividend Reinvestment Plan or Shares held in the Employee
Savings Plans) all of which are being tendered (partial tenders will not qualify
for this preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b) after
purchase of all the foregoing Shares, all other Shares validly tendered at or
below the Purchase Price and not withdrawn on or prior to the Expiration Date on
a pro rata basis, if necessary (with appropriate adjustments to avoid purchases
of fractional Shares, other than Shares held in the Dividend Reinvestment Plan
or unrestricted Shares held in the Employee Savings Plans).
2
<PAGE>
Notwithstanding clause (b) above, TEN reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer than 100 Shares. If TEN exercises this right, it
will increase the number of Shares that are purchased pursuant to the Offer in
an amount sufficient to allow the exercise of the right (i.e., the number of
Shares that would be owned by all shareholders who would become Odd Lot holders
as a result of the proration contemplated by clause (b)).
THE BOARDS OF DIRECTORS OF TEN AND CTG HAVE APPROVED THE OFFER. HOWEVER,
NEITHER TEN, CTG NOR ANY OF THEIR SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS
TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER
OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER AND AT WHAT PRICE.
TEN HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF TEN, CTG OR ANY OF THEIR
SUBSIDIARIES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
TEN is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to a valid state statute. If TEN
becomes aware of any valid state statute prohibiting the making of the Offer,
TEN will make a good faith effort to comply with such statute. If, after such
good faith effort, TEN cannot comply with such statute, the Offer will not be
made to, nor will tenders be accepted from or on behalf of, holders of Shares in
such state. In those jurisdictions whose securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of TEN by PaineWebber Incorporated, as Dealer
Manager, or one or more registered brokers or dealers licensed under the laws of
such jurisdictions.
Any questions, requests for assistance or requests for additional copies of
the enclosed materials may be directed to D.F. King & Co., Inc. (the
"Information Agent") or the undersigned at the addresses and telephone numbers
set forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
PAINEWEBBER INCORPORATED
Dealer Manager
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS AN AGENT OF TEN, CTG OR ANY OF THEIR SUBSIDIARIES, THE
DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
3
<PAGE>
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,800,000 SHARES OF CTG RESOURCES, INC. COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $27.00
PER SHARE OR LESS THAN $23.50 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THURSDAY, OCTOBER 30, 1997,
UNLESS THE OFFER IS EXTENDED.
TO OUR CLIENTS:
Enclosed for your consideration is the Offer to Purchase, dated October 2,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") setting forth an offer by The Energy Network,
Inc., a Connecticut corporation ("TEN") and a wholly owned subsidiary of CTG
Resources, Inc., a Connecticut corporation ("CTG"), to purchase up to 1,800,000
shares of Common Stock, without par value (the "Shares"), of CTG, at prices not
greater than $27.00 or less than $23.50 per Share, net to the seller in cash,
specified by tendering shareholders, upon the terms and subject to the
conditions of the Offer. Also enclosed herewith is certain other material
related to the Offer, including a letter to shareholders from Victor H.
Frauenhofer, Chairman of the Board and Chief Executive Officer of CTG.
TEN will determine a single per Share price (not greater than $27.00 or less
than $23.50 per Share) (the "Purchase Price") that it will pay for the Shares
validly tendered pursuant to the Offer and not withdrawn, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders. TEN will select the lowest Purchase Price that will enable it to
purchase 1,800,000 Shares (or such lesser number of Shares as are validly
tendered) pursuant to the Offer. TEN will purchase up to 1,800,000 Shares
validly tendered at prices at or below the Purchase Price and not withdrawn
prior to the Expiration Date, upon the terms and subject to the conditions of
the Offer, including the provisions thereof relating to proration. The Purchase
Price will be paid net to the tendering shareholders in cash with respect to all
Shares purchased. All Shares tendered and not purchased pursuant to the Offer,
including Shares tendered at prices in excess of the Purchase Price and Shares
not purchased because of proration or invalid tenders will be returned to the
tendering shareholders at TEN's expense as promptly as practicable following the
Expiration Date (as defined in the Offer to Purchase). See Section 1 of the
Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE SPECIMEN LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal, and
if so, at what price.
Your attention is called to the following:
(1) You may tender Shares at prices (in multiples of $0.25), not greater
than $27.00 or less than $23.50 per Share, as indicated in the attached
instruction form, net to you in cash.
(2) The Offer is for up to 1,800,000 Shares, constituting approximately 17%
of the total Shares outstanding as of September 29, 1997. Although it has no
present intention of so doing, TEN reserves the
<PAGE>
right to purchase more than 1,800,000 Shares pursuant to the Offer. The Offer is
not conditioned upon any minimum number of Shares being tendered, but is subject
to certain other conditions.
(3) The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, Eastern Standard Time, on Thursday, October 30, 1997, unless the Offer
is extended. Your instructions to us should be forwarded to us in ample time to
permit us to submit a tender on your behalf. If you would like to withdraw your
Shares that we have tendered, you can withdraw them so long as the Offer remains
open or at any time after December 1, 1997, if they have not been accepted for
payment.
(4) As described in the Offer to Purchase, if more than 1,800,000 Shares
have been validly tendered at or below the Purchase Price and not withdrawn on
or prior to the Expiration Date, as defined in Section 1 of the Offer to
Purchase, TEN will purchase Shares in the following order of priority:
(a) all Shares validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date by any shareholder who was as
of the close of business on October 2, 1997, and will continue to be at the
Expiration Date, the beneficial owner of an aggregate of fewer than 100
Shares (an "Odd Lot Owner") (including any Shares held in the Dividend
Reinvestment Plan or Shares held in the Employee Savings Plans) all of which
are being tendered (partial tenders will not qualify for this preference)
and completes the box captioned "Odd Lots" on the Letter of Transmittal and,
if applicable, the Notice of Guaranteed Delivery; and
(b) after purchase of all of the foregoing Shares, all Shares validly
tendered at or below the Purchase Price and not withdrawn on or prior to the
Expiration Date on a pro rata basis, if necessary (with appropriate
adjustments to avoid purchases of fractional Shares, other than Shares held
in the Dividend Reinvestment Plan or unrestricted Shares held in the
Employee Savings Plans).
Notwithstanding clause (b) above, TEN reserves the right, but is not
obligated, to purchase prior to purchasing any other Shares referred to in
clause (b), all Shares tendered by a shareholder who has tendered at or below
the Purchase Price all Shares owned, beneficially or of record, and as a result
of the proration contemplated by clause (b) would then own, beneficially or of
record, an aggregate of fewer than 100 Shares. If TEN exercises this right, it
will increase the number of Shares that are purchased pursuant to the Offer in
an amount sufficient to allow the exercise of the right (i.e., the number of
Shares that would be owned by all shareholders who would become Odd Lot holders
as a result of the proration contemplated by clause (b)).
(5) You will not be obligated to pay any brokerage commissions or
solicitation fees on the purchase of Shares by TEN pursuant to the Offer. Any
stock transfer taxes applicable to the sale of Shares to TEN pursuant to the
Offer will be paid by TEN, except as otherwise provided in Instruction 7 of the
Letter of Transmittal.
(6) If you owned beneficially an aggregate of fewer than 100 Shares
(including Shares held in the Dividend Reinvestment Plan or Shares held in the
Employee Savings Plans) as of the close of business on October 2, 1997, and
expect to continue to own fewer than 100 Shares as of the Expiration Date, and
you instruct us to tender at or below the Purchase Price on your behalf all such
Shares on or prior to the Expiration Date and check the box captioned "Odd Lots"
in the instruction form, all such Shares will be accepted for purchase before
proration, if any, of the purchase of other tendered Shares.
(7) If you wish to tender some Shares at one price and other Shares at
another price, you must complete a separate Instruction Form for each price at
which you wish to tender each portion of your Shares. We must submit separate
Letters of Transmittal on your behalf for each price you will accept, although
the same Shares cannot be tendered at more than one price.
2
<PAGE>
THE BOARDS OF DIRECTORS OF TEN AND CTG HAVE APPROVED THE OFFER. HOWEVER,
NEITHER TEN, CTG NOR ANY OF THEIR SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS
TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER
OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER AND AT WHAT PRICE.
TEN HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF TEN, CTG OR ANY OF THEIR
SUBSIDIARIES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer,
please so instruct us by completing, executing, detaching and returning to us
the instruction form on the detachable part hereof. An envelope to return your
instructions to us is enclosed. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise specified on the detachable part
hereof.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION OF THE OFFER.
THE OFFER IS BEING MADE TO ALL HOLDERS OF SHARES. TEN is not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to a valid state statute. If TEN becomes aware of any valid
state statute prohibiting the making of the Offer, TEN will make a good faith
effort to comply with such statute. If, after such good faith effort, TEN cannot
comply with such statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, holders of Shares in such state. In those
jurisdictions whose securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of TEN by PaineWebber Incorporated, as Dealer Manager, or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
3
<PAGE>
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 1,800,000 SHARES OF CTG RESOURCES, INC. COMMON STOCK
BY
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated October 2, 1997, and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by The Energy
Network, Inc., a Connecticut corporation ("TEN") and a wholly owned subsidiary
of CTG Resources, Inc., a Connecticut corporation ("CTG"), to purchase up to
1,800,000 shares of Common Stock, without par value per share (the "Shares") of
CTG, at prices not greater than $27.00 or less than $23.50 per Share, net to the
undersigned in cash, upon the terms and subject to the conditions of the Offer.
This will instruct you to tender to TEN the number of Shares indicated below
(or, if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, at the price per Share indicated below, upon the
terms and subject to the conditions of the Offer.
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR
IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having TEN purchase all the
Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share as low as
$23.50 or as high as $27.00.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / $ 23.50 / / $ 24.50 / / $ 25.50 / / $ 26.50
/ / $ 23.75 / / $ 24.75 / / $ 25.75 / / $ 26.75
/ / $ 24.00 / / $ 25.00 / / $ 26.00 / / $ 27.00
/ / $ 24.25 / / $ 25.25 / / $ 26.25
</TABLE>
ODD LOTS
Check this box ONLY if Shares are being tendered by or on behalf of a person
owning beneficially an aggregate of fewer than 100 Shares (including Shares held
in the Dividend Reinvestment Plan or Shares held in the Employee Savings Plans)
as of the close of business on October 2, 1997.
/ / By checking this box, the undersigned represents that the undersigned
beneficially owned on October 2, 1997, and will continue to
beneficially own at the Expiration Date, an aggregate of fewer than 100
Shares (including Shares held in the Dividend Reinvestment Plan or
Shares held in the Employee Savings Plans) and is tendering all of such
Shares.
<TABLE>
<S> <C>
Number of Shares to be Tendered: SIGN HERE
Shares* Signature(s)
Signature(s)
Name:
(Taxpayer Identification or
Social Security Number)
Name:
(Area Code and Telephone Number) Address: Zip Code
Date: , 1997
</TABLE>
- --------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
4
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
- ---------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the account
(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, the first
individual on the account
(1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
(1)
- ---------------------------------------------------------------
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
<S> <C> <C>
- ---------------------------------------------------------------
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person (3)
a designated ward,
7. a. The usual revocable The grantor-trustee (1)
savings trust account
(grantor is also
trustee)
b. So-called trust
account that is not a The actual owner (1)
legal or valid trust
under State law
8. Sole proprietorship The owner (4)
account
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)
(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following (Section references are to the Internal Revenue Code):
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), an individual
retirement plan or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free government bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure is strong evidence of
negligence. If negligence is shown, you will be subject to a penalty of 20% on
any portion of an underpayment attributable to that failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
PRESS RELEASE
CTG RESOURCES, INC. ANNOUNCES
STOCK REPURCHASE PLAN
HARTFORD, CONNECTICUT, OCTOBER 1, 1997 -- CTG Resources, Inc. (NYSE:CTG)
announced that its Board of Directors approved a financial recapitalization plan
designed to maximize shareholder value in the long-term and position CTG to
compete more effectively as the energy industry is deregulated and becomes more
competitive.
The recapitalization is based on the combination of a voluntary share repurchase
program and a repositioning of the cash dividend. The short-term objective is
to increase earnings per share and in the longer term provide increased internal
cash flow which will be retained to grow the company.
The plan includes; (a) a tender offer (Offer) by The Energy Network, Inc. (TEN),
a wholly-owned subsidiary of CTG, to purchase 1.8 million shares, or 17 percent,
of CTG's outstanding common stock; and (b) a reduction in CTG's current
quarterly dividend of $0.38 per share ($1.52 annually) to $0.25 per share ($1.00
annually).
The Offer, which commences October 2, 1997, will be effected through what is
called a "Dutch auction" at a price of not less than $XX.00 nor more than $XX.00
per share. The approximate $50 million transaction will be financed by a
combination of a term loan and revolving bank debt. All Shareholders who elect
to sell will receive the same price for their shares.
Victor Frauenhofer, Chairman and Chief Executive Officer, in his letter to
shareholders, said "We believe that the time has come to move faster in the
unregulated arena, which creates a need for greater financial flexibility. We
propose to achieve that flexibility by reducing the number of shares outstanding
and lowering CTG's dividend which in turn will increase the amount of
internally-generated cash flow that is retained for reinvestment by CTG." We
currently derive approximately 20% of our earnings from unregulated activities.
This places us at the leading edge among local natural gas distribution
companies." He continued "This strategy should over time produce growth in
earnings and a commensurate increase in the market value of our stock and in
time we believe this will result in a greater total overall return for our
shareholders."
<PAGE>
CTG is adopting a financial strategy that is intended to maximize shareholder
value and favorably position CTG in the current competitive environment. The
strategy includes:
(a) recapitalizing The Energy Network, Inc., its wholly-owned unregulated
subsidiary, in a way that will better enable CTG to respond as the
energy industry continues in a transition period between regulation
and open competition;
(b) reposition the cash dividend to a level comparable with
growth-oriented companies through a reduction in CTG's current
quarterly dividend of $0.38 per share ($1.52 annually) to $0.25 per
share ($1.00 annually);
(c) setting CTG's dividend target going forward at, on average, 50 to 55%
of the earnings that are paid out to shareholders as cash dividends;
and,
(d) repurchasing shares from those shareholders who prefer a higher level
of annual dividends rather than a strategy of seeking improved growth
in earnings and market-price appreciation.
The Company is financially healthy and is recapitalizing itself to position the
Company for future growth and to provide additional cash flow in a deregulated
environment. It will allow CTG to retain a higher level of earnings and to make
cash available to fund growth opportunities in both the regulated and
unregulated operations. The Regulated Operations are strong and the Company
will continue to strive to earn the maximum return allowed by the Connecticut
Department of Public Utility Control. The Unregulated Operations have a very
strong base with its District Heating and Cooling business and its investment in
the Iroquois Pipeline.
In response to deregulation and the growing competition, earlier this year
Connecticut Natural Gas Corporation (CNG) formed a holding company named CTG
Resources, Inc. to better define and separate its regulated and unregulated
businesses to better protect the regulated businesses and its customers from the
risks associated with the unregulated businesses and ventures.
<PAGE>
There will be no impact on the ratepayers of CNG as this transaction is between
CTG and its wholly-owned subsidiary, The Energy Network, Inc. The regulated
operations will continue to operate as they have previously and CNG's capital
structure will be maintained at historical levels, that is, 50% debt and 50%
equity. There will be no adjustment in rates or changes in the operations of
the regulated entity CNG.
The Company has been advised by Standard & Poor's and Moody's that the regulated
entity CNG debt ratings of A- and A3 respectively, will not be impacted by this
transaction.
The offer will expire at 12:00 Midnight, Eastern Standard Time on Thursday,
October 30, 1997, unless the Offer is extended by the Company.
The Dealer Manager for the Offer is PaineWebber, Incorporated. The Information
Agent is D. F. King & Co., Inc. Copies of the Offer to Purchase and related
materials, dated October 1, 1997, are being sent to all CTG shareholders. The
terms of the offer and procedures for tendering are explained in detail in the
materials.
No member of the Board of Directors nor the Officers of CTG and its wholly-owned
subsidiaries intends to tender any shares during the offering period.
CTG Resources, Inc. is the holding company of Connecticut Natural Gas
Corporation and The Energy Network, Inc. CTG is the largest transporter of
natural gas in Connecticut and is engaged in a number of energy-related
businesses under The Energy Network. CTG's home page on the Internet is
www.ctgcorp.com.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Statements contained in this Press Release regarding the future earnings
prospects, growth in earnings per share, dividend growth and debt-to-capital
ratio of CTG Resources, Inc. ("CTG") are not historical facts and are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Each of these items is
dependent on the earnings of CTG. Some of the most important factors which will
impact CTG's earnings, and could cause actual results to differ materially from
those discussed in the forward looking statements, through its wholly-owned
subsidiaries, Connecticut Natural Gas Corporation and The Energy Network, Inc.
include, but are not limited to, fluctuations in customer growth and demand,
weather, fuel costs and availability, regulatory action, federal and state
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
OCTOBER 2, 1997 AND THE RELATED LETTER OF TRANSMITTAL. CAPITALIZED TERMS NOT
DEFINED IN THIS ANNOUNCEMENT HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH
TERMS IN THE OFFER TO PURCHASE. THE ENERGY NETWORK, INC., A WHOLLY OWNED
SUBSIDIARY OF CTG RESOURCES, INC., IS NOT AWARE OF ANY JURISDICTION IN
WHICH THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL
ACTION PURSUANT TO A VALID STATE STATUTE. IF THE ENERGY NETWORK, INC.
BECOMES AWARE OF ANY VALID STATE STATUTE PROHIBITING THE MAKING OF THE
OFFER, THE ENERGY NETWORK, INC. WILL MAKE A GOOD FAITH EFFORT TO
COMPLY WITH SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT THE ENERGY
NETWORK, INC. CANNOT COMPLY WITH SUCH STATUTE, THE OFFER WILL NOT BE
MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS
OF SHARES IN SUCH STATE. IN THOSE JURISDICTIONS WHOSE SECURITIES,
BLUE SKY OR OTHER LAWS REQUIRE THE OFFER BE MADE BY A LICENSED
BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF
OF THE ENERGY NETWORK, INC. BY PAINEWEBBER INCORPORATED, AS
DEALER MANAGER, OR ONE OR MORE REGISTERED BROKERS OR DEALERS
LICENSED UNDER THE LAWS OF SUCH
JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
THE ENERGY NETWORK, INC.
A WHOLLY OWNED SUBSIDIARY OF
CTG RESOURCES, INC.
UP TO 1,800,000 SHARES OF COMMON STOCK OF CTG RESOURCES, INC. (NYSE: CTG)
AT A PURCHASE PRICE NOT GREATER THAN $27.00
OR LESS THAN $23.50 PER SHARE
The Energy Network, Inc., a Connecticut corporation ("TEN") and a wholly
owned subsidiary of CTG Resources, Inc., a Connecticut corporation ("CTG"),
invites the shareholders of CTG to tender up to 1,800,000 shares of Common
Stock, without par value (the "Shares"), of CTG to TEN at prices not greater
than $27.00 or less than $23.50 per Share, net to the seller in cash, specified
by such shareholders, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 2, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer").
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer to Purchase.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS
EXTENDED.
The Boards of Directors of each of TEN and CTG have approved the Offer.
However, neither TEN nor CTG or any of its directors, officers, or employees
makes any recommendation to shareholders as to whether to tender or refrain from
tendering their Shares. Each shareholder must make the decision whether to
tender Shares and, if so, how many Shares to tender and at what price or prices
Shares should be tendered. TEN has been advised that no director or officer of
TEN or CTG or any of their subsidiaries intends to tender any Shares pursuant to
the Offer.
<PAGE>
As promptly as practicable following 12:00 Midnight, Eastern Standard Time,
on Thursday, October 30, 1997, or such later time and date to which the Offer
may be extended by TEN in its sole discretion (the "Expiration Date"), TEN will,
in its sole discretion, determine a single per Share price (not greater than
$27.00 or less than $23.50 per Share) (the "Purchase Price") that it will pay
for the Shares validly tendered pursuant to the Offer and not withdrawn, taking
into account the number of Shares so tendered and the prices specified by the
tendering shareholders. TEN intends to select the lowest single per share
Purchase Price that will enable it to purchase 1,800,000 Shares (or such lesser
number of Shares as are validly tendered) pursuant to the Offer. TEN reserves
the right, in its sole discretion, to purchase more than 1,800,000 Shares
pursuant to the Offer. TEN will purchase up to 1,800,000 Shares validly tendered
at prices at or below the Purchase Price and not withdrawn, upon the terms and
subject to the conditions of the Offer, including the provisions thereof
relating to proration. All shares tendered and not purchased pursuant to the
Offer, including Shares tendered at prices in excess of the Purchase Price and
Shares not purchased because of proration, will be returned to the tendering
shareholders at TEN's expense as promptly as practicable following the
Expiration Date.
Subject to the terms and conditions of the Offer, if 1,800,000 or fewer
Shares have been validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, TEN will purchase all such Shares
(including fractional Shares in the Dividend Reinvestment Plan and unrestricted
fractional shares in the Employee Savings Plans). Upon the terms and subject to
the conditions of the Offer, if more than 1,800,000 Shares have been validly
tendered at or below the Purchase Price and not withdrawn on or prior to the
Expiration Date, TEN will purchase Shares in the following order of priority:
(a) first, all Shares validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date by any Odd Lot Owner who validly
tenders all of such Shares (partial tenders will not qualify for this
preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b)
second, after purchase of all of the foregoing Shares, all Shares validly
tendered in accordance with the Offer at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary
(with appropriate adjustments to avoid purchases of fractional Shares, other
than Shares held in the Dividend Reinvestment Plan or unrestricted shares held
in the Employee Savings Plans). Notwithstanding clause (b) above, TEN reserves
the right, but is not obligated, to purchase prior to purchasing any other
Shares referred to in clause (b), all Shares tendered by a shareholder who has
tendered at or below the Purchase Price all Shares owned and as a result of the
proration contemplated by clause (b) would then own an aggregate of fewer than
100 Shares. If TEN exercises this right, it will increase the number of Shares
that are purchased pursuant to the Offer in an amount sufficient to allow the
exercise of the right (i.e., the number of Shares that would be owned by all
shareholders who would become Odd Lot holders as a result of the proration
contemplated by clause (b)). For purposes of this Offer, TEN will be deemed to
have purchased Shares that are tendered at or below the Purchase Price and not
withdrawn (subject to the proration provisions of the Offer) when, as and if it
gives oral or written notice to the Depositary of its acceptance of such Shares
for payment pursuant to the Offer. TEN will pay for Shares purchased pursuant to
the Offer by depositing the aggregate Purchase Price therefor with the
Depositary, which will act as agent for tendering shareholders for purpose of
receiving payment from TEN and transmitting payment to the tendering
shareholders.
CTG is adopting a financial strategy that is intended to maximize
shareholder value and favorably position CTG in the current competitive
environment. This financial strategy includes: (a) recapitalizing TEN in a way
that will better enable CTG to respond as the natural gas industry continues in
a transition period between regulation and open competition; (b) reposition the
cash dividend to a level comparable with growth-oriented companies through a
reduction in CTG's current quarterly dividend of $0.38 per share ($1.52
annually) to $0.25 per share ($1.00 annually); (c) setting CTG's dividend target
going forward at, on average, 50 to 55% of the earnings that are paid out to
shareholders as cash dividends; and (d) repurchasing shares from those
shareholders who prefer a higher level of annual dividends rather than a
strategy of seeking improved growth in earnings and market-price appreciation.
2
<PAGE>
The Offer also provides those shareholders who are considering a sale of all
or a portion of their Shares the opportunity to determine the price or prices
(not in excess of $27.00 or less than $23.50) at which they are willing to sell
their Shares and, if any such shares are purchased pursuant to the Offer, to
sell those Shares for cash at prices that may be greater than market prices
prevailing immediately prior to the announcement of the Offer without the usual
transaction costs associated with open market sales.
TEN expressly reserves the right, in its sole discretion, and at any time
and from time to time, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof no later than 9:00 a.m., Eastern Standard
Time, on the next business day after the previously scheduled Expiration Date.
TEN also expressly reserves the right in its sole discretion, (i) to terminate
the Offer and not accept for payment any Shares not theretofore accepted for
payment or, subject to Rule 13e-4(f)(5) under the Exchange Act, which requires
TEN either to pay the consideration offered or to return the Shares tendered
promptly after the termination or withdrawal of the Offer, to postpone payment
for Shares upon the occurrence of any of the conditions specified in Section 6
of the Offer by giving oral or written notice of such termination to the
Depositary and making a public announcement thereof and (ii) to amend the Offer
in any respect (including, without limitation, by increasing or decreasing the
price to be paid for Shares or the number of Shares being sought in the Offer)
by giving oral or written notice of such amendments to the Depositary and, as
promptly as practicable thereafter, making a public announcement thereof. In the
event TEN amends the Offer as described, TEN may be required to extend the
Offer. See Section 15 of the Offer to Purchase.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after December 1, 1997 unless theretofore accepted
for payment as provided in the Offer to Purchase. To be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person who tendered the Shares to be
withdrawn and the number of Shares to be withdrawn. If the Shares to be
withdrawn have been delivered to the Depositary, a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution) must be submitted prior to the
release of such Shares. In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered holder
(if different from that of the tendering shareholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at one of the Book-Entry Transfer Facilities to be credited with the
withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by again following one of the procedures
described in the Offer to Purchase at any time prior to the Expiration Date. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by TEN, in its sole discretion, which
determination shall be final and binding.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION, WHICH SHOULD BE READ BEFORE SHAREHOLDERS DECIDE WHETHER TO ACCEPT
OR REJECT THE OFFER AND, IF ACCEPTED, AT WHICH PRICE OR PRICES TO TENDER THEIR
SHARES. THE INFORMATION REQUIRED TO BE DISCLOSED BY RULE 13E-4(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS CONTAINED IN THE OFFER TO
PURCHASE AND IS INCORPORATED IN THIS NOTICE BY REFERENCE. The Offer to Purchase
and the related Letter of Transmittal are being mailed to record holders of
Shares and will be furnished to brokers, banks and similar persons whose names,
or the names of whose nominees, appear on CTG's shareholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
3
<PAGE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and addresses listed below.
Requests for additional copies of the Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to the Information
Agent and such copies will be furnished promptly at TEN's expense. Shareholders
may also contact their local broker, dealer, commercial bank or trust company
for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(800) 578-5378 (toll free)
or
(212) 269-5550 (call collect)
The Dealer Manager for the Offer is:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
12th Floor
New York, New York 10019
(800) 894-0098 (toll free)
October 2, 1997
4
<PAGE>
[LOGO]
October 2, 1997
Dear Shareholder:
The Board of Directors of CTG Resources, Inc. ("CTG" or the "Company") at
its September meeting approved a financial recapitalization plan designed to
maximize shareholder value in the long-term and position our Company to compete
more effectively as the energy industry is deregulated and becomes more
competitive.
The recapitalization is based on the combination of a voluntary share
repurchase program and a repositioning of the cash dividend. The short-term
objective is to increase earnings per share and in the longer term provide
increased internal cash flow which will be retained to grow our Company.
The plan includes: (a) a tender offer (the "Offer") by The Energy Network,
Inc. ("TEN"), a wholly-owned subsidiary of CTG, to purchase up to 1.8 million
shares, or 17 percent, of CTG's outstanding common stock; and (b) a reduction in
CTG's current quarterly dividend from $0.38 per share ($1.52 annually) to $0.25
per share ($1.00 annually).
The Offer will be effected through what is called a "Dutch auction" at a
price of not less than $23.50 or more than $27.00 per share in cash. The
approximate $50 million transaction will be financed by a combination of a term
loan and revolving bank debt. All shareholders who elect to tender their shares
will receive the same price for the shares purchased by TEN.
The new quarterly dividend rate of $0.25 per share will be payable on
December 19, 1997 to shareholders of record on December 5, 1997. Future dividend
action will be guided by, among other factors, a target of paying out, on
average, 50 to 55% of the earnings of the Company. The Board of Directors of CTG
believes that a dividend target of 50 to 55% of earnings is more consistent with
companies operating today in a competitive environment.
We believe that the time has come to move faster in the unregulated arena,
which creates a need for greater financial flexibility. We propose to achieve
that flexibility by reducing the number of shares outstanding and lowering CTG's
dividend which in turn will increase the amount of internally-generated cash
flow that is retained for reinvestment by our Company.
Because earnings are limited and growth is impacted by economic conditions
in our natural gas delivery business, we have for some time emphasized new
ventures in unregulated energy businesses. We currently derive approximately 20%
of our earnings from unregulated activities. This places us at the leading edge
among local natural gas distribution companies such as our Company. This
strategy is designed to grow the Company's earnings. We believe that this
strategy will produce commensurate increase in the market value of our stock and
in time should result in a greater total overall return.
[LOGO]
<PAGE>
As this is a departure from our historical practices, we are offering those
of you who wish to do so an opportunity to sell your shares at a price that
exceeds the $23.31 closing price on October 1, 1997, the last trading day prior
to the commencement of the Offer.
Our solid underlying earnings prospects, combined with the effect of reduced
shares outstanding, will position the Company to achieve greater growth in
earnings going forward. This earnings growth will be further enhanced in the
future as our cash flow enables the transaction debt to be repaid and increases
available funds for future growth. By targeting a reduced dividend payout ratio,
the potential for future dividend increases is strengthened in line with the
projected growth in CTG's earnings.
CTG's strategy focuses on total overall return on capital (market price
increase plus dividend yield) and, for many of you, capital gains are taxed at
lower rates than dividend income. The price range established for the Offer will
allow those of you who desire a more income-directed investment to tender your
shares to the Company on favorable terms. However, we believe that those of you
who choose not to tender your shares will also benefit from this transaction. If
all 1.8 million shares are tendered, the remaining shareholders will own a 20%
greater interest in a more competitive company with stronger earnings per share
growth potential.
TEN is conducting the Offer through a procedure known as a "Dutch auction."
This procedure allows you to decide whether to sell all or a part of the shares
you own, if any. If you decide to sell any of your shares, you may then select
the price within the range of not less than $23.50 or more than $27.00 per share
at which you are willing to sell all or a portion of your shares. You may also
elect to sell your shares at the "Purchase Price" which is described below.
Based upon the number of shares tendered and the prices specified by the
tendering shareholders, TEN will determine the single per share price (the
"Purchase Price") within that range that will allow it to buy 1.8 million shares
(or such other number of shares as are properly tendered) at prices that are at
or below the Purchase Price. ALL SHAREHOLDERS WHOSE SHARES ARE PURCHASED WILL
RECEIVE THE SAME PRICE PER SHARE. TEN will pay the Purchase Price for all shares
properly tendered, and not withdrawn, at or below the Purchase Price, subject to
possible proration and provisions relating to tenders of fewer than 100 shares.
For tendering shareholders owning fewer than 100 shares, all of which, except as
provided in the Offer, are tendered at or below the Purchase Price, there will
be no proration of shares tendered. All other shares that have been tendered and
not purchased will be returned to the tendering shareholder.
IF YOU DO NOT WISH TO PARTICIPATE IN THE OFFER, YOU DO NOT HAVE TO TAKE ANY
ACTION. If you do not participate in the Offer, and you decide to retain your
shares, you will own a proportionately larger portion of the Company after the
repurchase has been completed.
IF YOU WANT TO TENDER YOUR SHARES, THE INSTRUCTIONS ON HOW TO DO SO ARE
EXPLAINED IN THE ENCLOSED MATERIALS. If you decide to participate and TEN
accepts your tender, you will promptly receive cash for your shares in the
amount of the Purchase Price times the number of shares you have tendered,
again, subject to possible proration of shares.
The Offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. Included in the Offer to Purchase at Section 8,
"Background and Purpose of the Offer," is a detailed discussion of management's
purpose for conducting the Offer. As indicated, the Company's basic objective in
this financial transaction is to enhance long-term shareholder value. I
encourage you to read these materials carefully before making any decision with
respect to the Offer.
Neither TEN, CTG nor any of their subsidiaries or any of their respective
Directors, Officers or Employees make any recommendations to any shareholder as
to whether to tender all or any shares. Each shareholder must make his or her
own decision as to whether to tender shares and if so, how many shares to tender
and at what price.
2
<PAGE>
No member of the Board of Directors nor the Officers of CTG and its
wholly-owned subsidiaries intends to tender any shares during the offering
period.
Please note that the Offer will expire at 12:00 Midnight, Eastern Standard
Time, on Thursday, October 30, 1997, unless extended by the Company. IF YOU HAVE
ANY QUESTIONS REGARDING THE OFFER OR REQUIRE ASSISTANCE, PLEASE CONTACT THE
INFORMATION AGENT, D.F. KING & CO., TOLL-FREE AT 1-800-578-5378 OR CALL COLLECT
AT 212-269-5550.
On behalf of your Board of Directors, thank you for your consideration of
this Offer.
Sincerely,
[LOGO]
Victor H. Frauenhofer
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
3
<PAGE>
MEMORANDUM OF UNDERSTANDING
October 1, 1997
4:00 P.M. Eastern Daylight Time
Each of the undersigned agrees to execute and deliver those of the documents
set forth in Exhibit A attached hereto substantially in the form reviewed
today by the parties thereto (and as modified as discussed today) as soon as
practicable following the date and time hereof.
CTG RESOURCES, INC. METROPOLITAN LIFE INSURANCE COMPANY
By /s/ James P. Bolduc By /s/
THE ENERGY NETWORKS, INC. TEXAS LIFE INSURANCE COMPANY
By /s/ James P. Bolduc By /s/
TEN TRANSMISSION COMPANY FLEET NATIONAL BANK
By /s/ James P. Bolduc By /s/ Suresh V. Chivukula
ENSERVE CORPORATION THE BANK OF NOVA SCOTIA
By /s/ James P. Bolduc By /s/ Paula MacDonald
ENI GAS SERVICES, INC.
By /s/ James P. Bolduc
THE HARTFORD STEAM COMPANY
By /s/ James P. Bolduc
<PAGE>
EXHIBIT A
1. 364-Day Revolving Credit Agreement between TEN and Fleet dated as of
October 1, 1997.
2. 3-Year Revolving Credit Agreement between TEN and Fleet dated as of
October 1, 1997.
3. $10,000,000 364-Day Revolving Credit Note from TEN to Fleet dated
October 1, 1997.
4. $10,000,000 3-Year Revolving Credit Note from TEN to Fleet dated
October 1, 1997.
5. Guaranty re 364-Day Revolving Credit Agreement from TEN Transmission
and HSC to Fleet dated as of October 1, 1997.
6. Guaranty re 364-Day Revolving Credit Agreement from ENServe and ENI Gas
to Fleet dated as of October 1, 1997.
7. Guaranty re 3-Year Revolving Credit Agreement from TEN Transmission and
HSC to Fleet dated as of October 1, 1997.
8. Guaranty re 3-Year Revolving Credit Agreement from ENServe and ENI Gas
to Fleet dated as of October 1, 1997.
9. Support Letter from CTG to Fleet dated October 1, 1997.
10. $45,000,000 Note Purchase Agreement(s) between TEN and the Purchasers
dated as of October 1, 1997 ("Note Purchase Agreement").
11. $_________________6.99% Senior Secured Note from TEN to
________________ dated _________________________ and $__________________
6.99% Senior Secured Note to _______________________ dated ______________.
12. Guarantee from TEN Transmission and HSC to Purchasers dated as of
October 1, 1997.
13. Guarantee from ENServe and ENI Gas to Purchasers dated as of October 1,
1997.
14. Support Letter from CTG to Purchasers dated October 1, 1997.
15. Amendment to Reimbursement Agreement between TEN and Nova Scotia dated
as of October 1, 1997.
16. Guaranty from TEN Transmission and HSC to Nova Scotia dated October 1,
1997.
17. Guaranty from ENServe and ENI Gas to Nova Scotia dated October 1, 1997.
18. Forward Equity Purchase Agreement between CTG and TEN dated as of
October 1, 1997 (the "FEPA").
2
<PAGE>
19. Pledge and Assignment Agreement from TEN to State Street Bank and Trust
Company, as Collateral Agent (the "Collateral Agent") dated as of
October 1, 1997.
20. Agreement and Consent among CTG, TEN, and Collateral Agent dated as of
October 1, 1997.
21. Financing Statement from TEN, as Debtor, to Collateral Agent, as Secured
Party.
3
<PAGE>
Exhibit 9(b)(2)
3-YEAR REVOLVING CREDIT AGREEMENT
---------------------------------
THIS 3-YEAR REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of the
1st day of October, 1997, by and between FLEET NATIONAL BANK, a national banking
association with an office at One Federal Street, Boston, Massachusetts 02110
("Lender"), and THE ENERGY NETWORK, INC., a Connecticut corporation with a
mailing address at P.O. Box 1500, Hartford, Connecticut 06114-1500 ("Borrower").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
Borrower has requested that Lender provide Borrower with a secured
revolving credit loan in the aggregate principal amount not to exceed Ten
Million Dollars ($10,000,000) at any time outstanding (the "Loan") which maximum
aggregate amount shall be reduced by $500,000 on the first day of each fiscal
quarter of the Borrower commencing January 1, 1998, and Lender has agreed to
extend such Loan upon the terms and subject to the conditions hereinafter set
forth.
ARTICLE I
---------
DEFINITIONS
-----------
As used herein, the following terms shall have the indicated meanings:
"ADVANCE" shall mean an advance of all or some portion of the principal of
the Loan pursuant to Section 2.01 of this Agreement.
"AGREEMENT" shall mean this 3-Year Revolving Credit Agreement, as the same
may be supplemented, amended or restated from time to time.
"BORROWER" shall have the meaning specified in the Preamble to this
Agreement.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, a amended from time to
time.
"COLLATERAL" shall mean any and all assets, rights and interests in or to
property of Borrower or any other Person pledged or mortgaged to Lender, or in
which a security interest is granted to Lender, from time to time, as security
pursuant to the Security Documents, whether now owned or hereafter acquired.
"COMMONLY CONTROLLED ENTITY" shall have the meaning specified in Section
3.09(a) of this Agreement.
"COSTS" shall mean all costs and expenses incurred or to be incurred by
Lender or Borrower in connection with or incidental to the Loan including,
without limitation, filing fees, fees
<PAGE>
associated with UCC lien search reports, legal fees, audit fees and all other
costs and fees incurred in connection with the Loan.
"DEFAULT RATE" shall have the meaning specified in Section 7.02 of this
Agreement.
"EMPLOYEE BENEFIT PLAN" shall have the meaning specified in Section 3.09(b)
of this Agreement.
"EMPLOYEE WELFARE PLAN" shall mean an employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
"ENVIRONMENTAL REQUIREMENT(S)" shall mean any present or future law,
statute, ordinance, rule, regulation, order, code, license, permit, decree,
judgment, directive or the equivalent of or by any Governmental Authority and
relating to or addressing the protection of human health or the environment.
"ERISA" shall have the meaning specified in Section 3.09(b) of this
Agreement.
"EVENT OF DEFAULT" shall have the meaning specified in Section 7.01 of this
Agreement.
"FEES" shall mean the balance deficiency fee and the commitment fee payable
pursuant to Section 5.13 and Section 5.14 of this Agreement.
"FINANCIAL STATEMENTS" shall mean the balance sheet, income statement,
statement of cash flows and retained earnings statement of Borrower on a
consolidated and consolidating basis for the year or other period then ended,
together with supporting schedules, prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as promulgated or adopted by the Financial Accounting
Standards Board and in effect from time to time, consistently applied with past
Financial Statements of Borrower.
"GOVERNMENTAL AUTHORITY" shall mean the United States government, any state
or other political subdivision thereof, any agency, court or body of the United
States government, any state or other political subdivision thereof, or any
quasi-governmental agency or authority exercising executive, legislative,
judicial, regulatory or administrative functions.
"GUARANTOR" shall mean, jointly, severally and collectively, TEN
Transmission Company, The Hartford Steam Company, ENServe, Incorporated and ENI
Gas Services, Inc.
"GUARANTY" shall mean those certain unconditional and continuing guaranties
of each Guarantor of even date herewith in favor of Lender, as the same may be
supplemented or amended from time to time.
"HAZARDOUS MATERIAL" shall mean any material or substance (i) which,
whether by its nature or use, is now or hereafter defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any Environmental
Requirement, (ii) which is toxic, explosive, corrosive,
-2-
<PAGE>
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous to human health or the environment, (iii) which is or contains
petroleum or any fraction thereof, including crude oil, heating oil, gasoline or
diesel fuel, or (iv) the presence of which requires investigation or remediation
under any Environmental Requirement.
"LENDER" shall have the meaning specified in the Preamble to this
Agreement.
"LOAN" shall have the meaning specified in the Preamble to this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Security
Documents and all other documents or instruments executed and delivered by or on
behalf of Borrower in connection with the Loan and the transactions contemplated
hereby, as the same may be supplemented or amended from time to time.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower or (ii) the Collateral, in each
case as determined by Lender in its sole discretion.
"MATURITY DATE" shall mean September 30, 2000.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NOTE" shall mean the 3-Year Revolving Credit Note in the original
principal amount of $10,000,000, as the same is thereafter reduced, of even date
herewith in the form attached hereto as EXHIBIT A, made by Borrower in favor of
Lender to evidence the Loan, as the same may be supplemented or amended from
time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"REVOLVING CREDIT COMMITMENT" shall have the meaning specified in Section
2.01 of this Agreement.
"SECURED PARTIES" shall mean the Lender, the holders of the Borrower's
Senior Secured Notes Due 2009 issued as of October 1, 1997 and The Bank of Nova
Scotia, as issuer of that certain Irrevocable Standby Letter of Credit dated
March 20, 1996.
"SECURITY AGREEMENT" shall mean that certain Pledge and Assignment
Agreement made by Borrower in favor of State Street Bank and Trust Company, as
agent for the Secured Parties as the same may be supplemented or amended from
time to time.
"SECURITY DOCUMENTS" shall have the meaning set forth in Section 2.05 of
this Agreement.
-3-
<PAGE>
ARTICLE II
----------
GENERAL TERMS
-------------
SECTION 2.01. REDUCING REVOLVING CREDIT LOAN. Subject to the terms and
conditions contained in this Agreement and provided neither an Event of Default
nor any event which with notice or lapse of time, or both, would constitute an
Event of Default hereunder, has occurred, Lender agrees to make loans to
Borrower from time to time until the Maturity Date on a revolving credit basis
in an aggregate principal amount not to exceed $10,000,000 (the "Revolving
Credit Commitment"), provided, however, that such Revolving Credit Commitment
shall be reduced by $500,000 on January 1, 1998 and by an additional $500,000 on
the first day of each fiscal quarter of the Borrower thereafter.
Borrower may request Advances from Lender in accordance with Section 2.03
hereof. Within the Revolving Credit Commitment as the same shall be reduced in
accordance with the terms hereof, Borrower may borrow, repay (without premium or
penalty) and reborrow under the provisions of this Section and Section 2.03.
Each partial payment shall be in the amount of at least Ten Thousand Dollars
($10,000). If at any time the outstanding principal balance of the Advances
exceeds the Revolving Credit Commitment, as the same shall be reduced, Borrower
shall immediately pay to Lender the amount of such excess. The Advances shall
be evidenced by the Note, which Note is hereby incorporated herein by reference
and made a part hereof.
SECTION 2.02. PAYMENTS OF PRINCIPAL AND INTEREST ON THE LOAN.
(a) Subject to Section 7.02 hereof, the outstanding unpaid principal
balance of the Advances shall bear interest at a rate per annum equal to one of
the following, a selected by Borrower in accordance with the provisions of the
Note:
(i) in the event that the rating by Standard and Poor's Corporation on any
publicly rated debt of any CTG subsidiary is BBB, a LIBO Rate (as such term
is defined in the Note) plus 80 basis points (.80%), with each change in
said rate to be effective on the date of the commencement of each Interest
Period (as defined in the Note) without notice to Borrower;
(ii) in the event that the rating by Standard and Poor's Corporation is
BBB+ or better, a LIBO Rate plus 65 basis points (.65%), with each change
in said rate to be effective on the date of the commencement of each
Interest Period without notice to Borrower; or
(iii) a Bank Rate (as such term is defined in the Note).
Interest will be computed in arrears and based on a three hundred sixty
(360) day year counting the actual number of days elapsed. Interest on the
outstanding principal balance of the Advances will be paid monthly commencing on
November 1, 1997, and continuing on the same
-4-
<PAGE>
day of each successive month until the outstanding principal balance of the
Advances is paid in full and the Loan evidenced by the Loan Documents is
terminated. A final payment of all remaining principal and accrued interest on
the Loan will be made by Borrower to Lender on the Maturity Date.
(b) All payments to be made by Borrower of principal of, and interest
on, the Note and all fees and other sums, costs, charges and expenses payable by
Borrower hereunder, may be made by Lender, at its option, debiting any demand
deposit account(s) of Borrower maintained with Lender, or in such other
reasonable manner as may be designated by Lender in writing to Borrower, and in
any event all such payments shall be made to Lender in U.S. dollars in
immediately available funds prior to 12:00 o'clock noon (Hartford time) on or
before the day that such payment is due. Any payments coming due on a Saturday,
Sunday or other day in which banks in the State of Connecticut are required to
be closed will be due on the next business day and such additional time will be
taken into account in computing interest thereon. Borrower hereby irrevocably
authorizes Lender to so debit its demand deposit account(s) maintained with
Lender and Lender shall be entitled to rely on this authorization.
SECTION 2.03. ADVANCES UNDER THE LOAN. Borrower will open and maintain
with Lender an account. Advances under the Loan will be made by Lender to
Borrower upon telephonic request to credit such Advance to Borrower's account
made by an officer of Borrower who has been duly authorized by its board of
directors and whose name, along with a certified copy of such resolutions, has
been transmitted to Lender. Such request shall be confirmed in writing by
Lender's receipt, on the same day such request is received if such request was
received prior to 10:00 a.m. e.s.t., of a request for Advance in the form of
EXHIBIT B attached hereto, signed by a duly authorized officer of Borrower
indicating the date and amount of the Advance requested and acknowledging the
principal balance outstanding on the Loan, as of the said date after taking into
consideration the amount of the Advance as so requested.
SECTION 2.04. USE OF PROCEEDS. The proceeds of the Advances shall be used
exclusively by Borrower for short term working capital needs, general corporate
purposes and the payment of Costs.
SECTION 2.05. SECURITY. Payment and performance of the obligations,
indebtedness and liabilities of Borrower to Lender, whether under the Note or
otherwise, shall be secured by:
(a) a first priority security interest pursuant to the Security
Agreement shared PARI PASSU with the Secured Parties in (i) all equity
contributions made and to be made to the Borrower under that certain Forward
Equity Purchase Agreement between CTG Resources, Inc. and Borrower dated as of
October 1, 1997 (the "Forward Equity Purchase Agreement") and (ii) all of the
common stock of each Guarantor owned or hereafter acquired by Borrower;
(b) the Guaranty;
(c) the support letter from CTG Resources, Inc. in favor of Borrower
dated October 1, 1997; and
-5-
<PAGE>
(d) such other security documents as may be required by Lender.
All agreements and instruments described in this Section 2.05, together
with any and all other agreements and instruments now or hereafter securing the
Note, are sometimes hereinafter referred to collectively as the "Security
Documents" and individually as a "Security Document".
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Loan,
Borrower hereby represents and warrants to Lender (which representations and
warranties shall survive the delivery of the Note and the making of the Loan)
that:
SECTION 3.01. FINANCIAL STATEMENTS. Borrower has heretofore furnished to
Lender Borrower's Financial Statements which fairly present the financial
condition of Borrower as of their date, and the results of its operations for
the year or other period then ended in conformity with GAAP. To the best of
Borrower's knowledge and belief, Borrower does not have any contingent
obligations, liabilities for taxes or unusual forward or long-term commitments
except as specifically mentioned in the Financial Statements. Since the date of
the Financial Statements, there has been no Material Adverse Change, and since
that date, no dividends or other distributions have been declared or paid or
made to the stockholders of Borrower.
SECTION 3.02. ORGANIZATION, ETC. Borrower (a) is duly organized, validly
existing and in good standing under the laws of its state of incorporation, (b)
is duly qualified to transact business in every jurisdiction where, because of
the nature of its business or property, such qualification is required; (c) has
full power and authority to own its property and assets and to carry on its
business as now being conducted and (d) has full power to execute, deliver and
perform its obligations under the Loan Documents to which it is a party.
SECTION 3.03. AUTHORIZATION, COMPLIANCE, ETC. The execution and delivery
of, and the performance by Borrower of its obligations under, the Loan Documents
(a) are within its corporate powers, (b) have been duly authorized by all
requisite corporate action, (c) do not and will not violate any provision of
law, any order of any court or other agency of government, or the corporate
charter or by-laws of Borrower, and (d) do not and will not violate any
indenture, agreement or other instrument to which it is a party, or by which it
is bound, or be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or except as may be provided
by this Agreement, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of
Borrower pursuant to, any such indenture, agreement or instrument. Borrower is
not required to obtain any consent, approval or authorization from, or to file
any declaration or statement with, any governmental instrumentality or other
agency in connection with or as a condition to the execution, delivery or
performance of the Loan Documents.
-6-
<PAGE>
SECTION 3.04. LITIGATION. There is no action, suit or proceeding at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of Borrower, threatened against or affecting Borrower other than as
has been previously disclosed in writing to Lender.
SECTION 3.05. TITLE TO PROPERTIES. Borrower has good title to all of its
properties and assets, free and clear of all mortgages, security interests,
restrictions, liens and encumbrances of any kind, except liens permitted under
Section 6.02 hereof.
SECTION 3.06. BORROWER NOT AN INVESTMENT COMPANY. Borrower is not an
"investment company", or a company "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
SECTION 3.07. MARGIN STOCK. Borrower does not own or have any present
intention of acquiring, any "margin security" within the meaning of Regulation
G, or any "margin stock" within the meaning of Regulation U, of the Board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock"), nor does Borrower extend credit to others for the purpose of
purchasing or carrying such margin stock. None of the proceeds of the Loan will
be used, directly or indirectly, by Borrower for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry, any margin security or margin stock or
for any other purpose which might constitute the transactions contemplated
hereby a "purpose credit" within the meaning of said Regulation G or Regulation
U, or cause this Agreement to violate any other regulation of the Board of
Governors of the Federal Reserve System or the Securities Exchange Act of 1934,
as amended, or any rules or regulations promulgated under such statutes.
SECTION 3.08. FILING AND PAYMENT OF TAXES. Borrower has filed all
federal, state and local tax returns required to be filed, and has paid, or made
adequate provision for the payment of, all federal, state and local taxes,
charges and assessments.
SECTION 3.09. PENSION PLANS, ETC.
(a) PLANS. Except as set forth in a separate letter to Lender of even
date herewith and acknowledged by Lender in writing, neither Borrower nor any
entity with which Borrower would be aggregated (a "Commonly Controlled Entity")
under Section 414(b), (c), (m), or (o) of the Code, maintains or contributes to
any pension, profit sharing, or similar plan providing for a program of deferred
compensation to any employee or former employee.
(b) FUNDING OF EMPLOYEE BENEFIT PLANS. All contributions and other
payments required to be made by Borrower or any Commonly Controlled Entity to
all employee benefit plans, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which either
Borrower or any Commonly Controlled Entity maintains or maintained or to which
any of them contributes or has contributed (the "Employee Benefit Plans") have
been made or reserves adequate for such purposes has been set aside and reflect
on Borrower's financial statements. Except as provided in the following
sentence, no Employee Benefit Plan is a plan subject to Section 412 of the Code
or Section 302 of ERISA, nor is any Employee Benefit Plan a multiemployer plan
as defined in Section 4001(a)(3) of ERISA. The three defined benefit
-7-
<PAGE>
plans maintained by the Borrower and its Commonly Controlled Entities are
subject to Section 412 of the Code and Section 302 of ERISA. Each other
Employee Benefit Plan which is an employee pension benefit plan, as defined in
Section 3(2) of ERISA, has been determined to be qualified under Section 401(a)
or Section 403(a) of the Code and nothing has occurred which would cause the
loss of such qualification or the imposition of any tax liability or penalty
under the Code or ERISA on Borrower.
(c) ADMINISTRATION, ETC. Each Employee Benefit Plan has been and is
administered in accordance with its terms and applicable law. To its knowledge,
Borrower has not breached any fiduciary duty imposed on it under ERISA with
respect to any Employee Benefit Plan, or engaged in any prohibited transaction,
as defined in Title I of ERISA or Section 4975 of the Code, involving any
Employee Benefit Plan for which no exemption is available.
(d) WELFARE PLANS. No Employee Benefit Plan which is an employee
welfare benefit plan, as defined in Section 3(1) of ERISA, if any, provides for
continuing benefits or coverage for any participant (or beneficiary) after the
termination of the participant's employment except as may be required under
Section 4980B of the Code or applicable state statutory law, and except that
medical insurance is provided in certain instances.
(e) CLAIMS. There are no claims (other than routine claims for
benefits), actions or lawsuits asserted or instituted with respect to, and
Borrower has no knowledge of any threatened claims or litigation with respect
to, any Employee Benefit Plan or any fiduciary thereof.
SECTION 3.10. ENVIRONMENTAL MATTERS. Borrower:
(a) Except as disclosed in the Annual Report on Form 10-K of the
Connecticut Natural Gas Corporation for the calendar year 1996, has not received
any notice, citation, summons, directive, order or other communication, written
or oral, from, and Borrower has no knowledge, after reasonable inquiry, of any
notice, citation, summons, directive, order or other communication by, any
Governmental Authority or any other person concerning the presence, generation,
treatment, storage, transportation, transfer, disposal, release or other
handling of any Hazardous Material within, on, from, related to, or affecting
any real property owned or occupied by Borrower; and
(b) Except as disclosed in the Annual Report on Form 10-K of the
Connecticut Natural Gas Corporation for the calendar year 1996, has no
knowledge, after reasonable inquiry, that any real property owned or occupied by
Borrower has ever been used either by Borrower, any tenant or any predecessor in
interest, to generate, treat, store, transport, transfer, dispose of, release or
otherwise handle any Hazardous Material, except in material compliance with all
Environmental Requirements.
SECTION 3.11. PATENTS, TRADEMARKS, ETC. Borrower owns or possesses all
the patents, trademarks, service marks, trade names, copyrights, consents and
licenses, and all rights with respect to the foregoing, necessary for the
current and currently planned future conduct of its business, without any known
conflict with the rights of others.
-8-
<PAGE>
SECTION 3.12. FULL DISCLOSURE. Neither the Financial Statements referred
to in Section 3.01, nor any statement of fact made by or on behalf of Borrower
in this Agreement or any of the other Loan Documents or any certificate, written
statement or schedule furnished to Lender pursuant hereto, contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading.
SECTION 3.13. ENFORCEABILITY. This Agreement and all other Loan Documents
executed and delivered in connection herewith are legal, valid and binding
obligations of Borrower, and with respect to those Loan Documents executed and
delivered by Guarantor, of Guarantor, and are enforceable against Borrower and
Guarantor, as the case may be, in accordance with their terms except as such
enforceability may be limited by (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity.
SECTION 3.14. SOLVENCY. The fair saleable value of Borrower's assets
exceeds all probable liabilities of Borrower; Borrower does not have
unreasonably small capital in relation to the business in which it is or
proposes to be engaged; and Borrower has not incurred, nor believes that it will
incur after giving effect to the transactions contemplated by this Agreement,
debts beyond its ability to pay such debts as they become due.
ARTICLE IV
----------
CONDITIONS OF MAKING THE LOAN
-----------------------------
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Lender to make the initial Advance hereunder is subject to the satisfaction of
the following conditions precedent:
(a) The representations and warranties set forth in Article III
hereof and in all other Loan Documents shall be true and correct.
(b) Borrower shall have executed and delivered to Lender, or caused
to be executed and delivered to Lender, on or prior to the date of execution of
this Agreement, each of the documents, opinions and certificates required by
Lender, each in scope, form and substance satisfactory to Lender in its sole
discretion, and all other documents reasonably necessary to consummate the
lending transactions contemplated hereby.
(c) All legal matters incident to the transactions hereby
contemplated shall be satisfactory to counsel for Lender.
(d) No Event of Default, nor any event which upon notice or lapse of
time, or both, would constitute such an Event of Default, shall have occurred
and be continuing.
SECTION 4.02. CONDITIONS PRECEDENT TO ADDITIONAL ADVANCES. The obligation
of Lender to make each Advance in connection with the Loan is subject to the
conditions precedent that, on the date of each such Advance:
-9-
<PAGE>
(a) All representations and warranties set forth in Article III
hereof and in all other Loan Documents shall be true and accurate as of the date
each Advance is requested to be made, except with respect to the representations
and warranties in Section 3.01 of this Agreement as it relates to the Financial
Statements of the Borrower;
(b) No event has occurred and is continuing, or would result from the
making of the Advance, which constitutes an Event of Default hereunder or would
constitute such an Event of Default but for the requirement that notice be given
or time elapse, or both; and
(c) Borrower shall represent and warrant to Lender that the financial
condition of Borrower has not materially adversely changed since the submission
of Borrower's most recent financial information to Lender.
Each Request for Advance shall constitute a certificate by Borrower to such
effect.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of the principal
of, and interest on, the Note and any other indebtedness, obligation and
liability of Borrower to Lender under the Loan Documents, whether now existing
or arising hereafter, and termination of the loan facility evidenced by the Loan
Documents, Borrower will:
SECTION 5.01. PRESERVATION OF ASSETS; COMPLIANCE WITH LAW.
(a) Do or cause to be done all things reasonably necessary to
preserve, renew and keep in full force and effect its corporate existence,
rights, licenses, permits and franchises; at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
property used or useful in the conduct of its business and keep the same in good
repair, working order and condition, and from time to time, make, or cause to be
made, all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; and
(b) Comply with all applicable laws, rules, regulations and orders,
whether now in effect or hereafter enacted or promulgated by any Governmental
Authority.
SECTION 5.02. TAXES, ETC. Pay and discharge or cause to be paid and
discharged, when due, all taxes, assessments and governmental charges or levies
imposed upon it or upon its respective income and profits or upon any of its
property, real, personal or mixed, or upon any part thereof, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
might become a lien or charge upon such properties or any part thereof,
PROVIDED, HOWEVER, Borrower may contest in good faith any such taxes,
assessments and governmental charges or levies, and withhold payment thereof, if
Borrower properly commences and thereafter diligently pursues the contest.
-10-
<PAGE>
SECTION 5.03. NOTICE OF PROCEEDINGS. Give prompt written notice to Lender
of any proceedings instituted against it by or in any Federal or state court or
before any commission or other regulatory body, whether Federal, state or local.
SECTION 5.04. FINANCIAL REPORTING. Furnish to Lender:
(a) Within ninety (90) days of the end of each fiscal year,
consolidated and consolidating Financial Statements certified (without
qualification) by independent certified public accountants selected by Borrower
and approved by Lender, showing the financial condition at the close of such
fiscal year, the results of operations during such year and containing a
statement to the effect that its independent public accountants have examined
the provisions of this Agreement and that no Event of Default, nor any event
which with notice or lapse of time, or both, would constitute such an Event of
Default, has occurred;
(b) Within sixty (60) days after the end of each quarter in each such
fiscal year, consolidated and consolidating Financial Statements for such period
and the fiscal year to that date, subject to changes resulting from routine
year-end audit adjustments, in form satisfactory to Lender, prepared and
certified by the chief financial officer of Borrower to the best of his or her
information and belief;
(c) Simultaneously with the furnishing of each of the Financial
Statements to be delivered pursuant to subsections (a) and (b) above, a
certificate in the form of EXHIBIT C hereto and certified by the President or
chief financial officer of Borrower; and
(d) Promptly, from time to time such other information regarding its
operations, assets, business, affairs and financial condition or the operations,
assets, business, affairs and financial condition of any of its subsidiaries, as
Lender may reasonably request.
SECTION 5.05. VISITATION AND INSPECTION RIGHTS. Permit agents or
representatives of Lender to inspect and to discuss the affairs, finances and
accounts of Borrower with its officers, at any time and from time to time during
normal business hours upon twenty-four hours notice to Borrower, at Borrower's
reasonable expense after an Event of Default (including, without limitation, the
reasonable fees and expenses of such agents or representatives), (i) the
Collateral, and (ii) Borrower's books and records and to make abstracts or
reproductions thereof and to duplicate, reduce to hard copy or otherwise use any
and all computer or electronically stored information or data.
SECTION 5.06. NOTICE OF EVENT OF DEFAULT. Immediately advise Lender of
any Material Adverse Change, or of the occurrence of any Event of Default, or of
the occurrence of any event which upon notice or lapse of time or both would
constitute such an Event of Default.
SECTION 5.07. ACCOUNTING SYSTEM. Maintain a standard system of accounting
in accordance with GAAP.
SECTION 5.08. FINANCIAL COVENANTS.
-11-
<PAGE>
(a) For purposes of this Section, the following terms shall have the
following definitions and any undefined terms shall be defined in accordance
with GAAP:
(i) "DEBT SERVICE" shall mean for any relevant accounting period the
aggregate amount of principal and interest payments due from Borrower with
respect to its Total Debt.
(ii) "DEBT SERVICE COVERAGE RATIO" shall mean for any relevant
accounting period the ratio of (x) earnings before interest, taxes ,
depreciation, amortization and dividends (EBITDA) plus amounts received
under the Forward Equity Purchase Agreement to (y) Debt Service.
(iii) "INTEREST COVERAGE RATIO" shall mean for any relevant
accounting period the ratio of (x) earnings before interest, taxes and
dividends (EBIT) plus amounts received under the Forward Equity Purchase
Agreement to (y) the aggregate amount of interest payments due from
Borrower with respect to its Total Debt.
(iv) "SENIOR DEBT" shall mean the Loan, all debt secured PARI PASSU
with the Loan pursuant to the Collateral Agency Agreement and any other
indebtedness of Borrower owed to Lender.
(v) "TANGIBLE NET WORTH" shall mean the excess of Borrower's total
assets over its total liabilities computed in accordance with generally
accepted accounting principles consistently applied, less all intangible
assets and deferred charges, including, without limitation, goodwill,
unamortized debt discount, organization expenses, trademarks and trade
names, patents, deferred product development costs, the Borrower's
interests under the Forward Equity Purchase Agreement, and similar items.
(vi) "TOTAL DEBT" shall mean Senior Debt, as well as any of
Borrower's other loan or lease obligations then outstanding.
(b) At all times during the period the Loan is outstanding, Borrower
agrees to fulfill each of the following financial covenants:
(i) Not permit the ratio of Total Debt to Tangible Net Worth to
exceed the 2.25 to 1 on a consolidated basis, to be tested quarterly;
(ii) Not permit its Tangible Net Worth to be less than $30,00,000 on
a consolidated basis, to be tested annually;
(iii) Not permit its Debt Service Coverage Ratio to be less than 1.25
to 1, as tested quarterly; and
(iv) Not permit its Interest Coverage Ratio to be less than 2.5 to 1,
as tested quarterly.
-12-
<PAGE>
SECTION 5.09. LENDER AS PRINCIPAL DEPOSITORY. Use Lender as the principal
depository of its funds.
SECTION 5.10. INSURANCE. Keep all of its insurable properties, now or
hereafter owned, adequately insured at all times against loss or damage by fire
or other casualty to the extent customary with respect to like properties of
companies conducting similar businesses; maintain public liability, business
interruption and worker's compensation insurance insuring Borrower to the extent
customary with respect to companies conducting similar businesses, all by
financially sound and reputable insurers.
SECTION 5.11. ENVIRONMENTAL INDEMNIFICATION. With respect to
environmental matters:
(a) comply strictly and in all material respects with all
Environmental Requirements, and cause all tenants or other occupants of any real
property which Borrower owns or occupies to comply, in all material respects
with all Environmental Requirements, and not generate, treat, store, handle,
process, transfer, transport, dispose of, release or otherwise use, and not
permit any tenant or other occupant of such property to generate, treat, store,
handle, process, transfer, transport, dispose of, release or otherwise use,
Hazardous Materials within, on, under or about such property in a manner that
could lead to the imposition on Borrower, Lender or any such real property of
any liability or lien of any nature whatsoever under any Environmental
Requirement;
(b) notify Lender promptly in the event of any material spill or
other release of any Hazardous Material within, on, under or about any real
property owned or occupied by Borrower which is required to be reported to a
Governmental Authority under any Environmental Requirement, promptly forward to
Lender copies of any notices received by Borrower relating to alleged violation
of any Environmental Requirement and promptly pay when due any fine or
assessment against Borrower, Lender or any such real property relating to any
Environmental Requirement, PROVIDED, HOWEVER, Borrower may contest in good faith
any such fine or assessment, and withhold payment thereof, if Borrower properly
commences and thereafter diligently pursues the contest.; and
(c) indemnify, defend, and hold Lender harmless from and against any
claim, cost, damage (including, without limitation, consequential damages),
expenses (including, without limitation, attorneys' fees and expenses), loss,
liability, or judgment now or hereafter arising as a result of any claim for
environmental cleanup costs, any resulting damage to the environment and any
other environmental claims against Borrower, Lender, the Premises or any other
real property which Borrower owns or occupies. Notwithstanding anything
contained herein to the contrary, the provisions of this subparagraph (c) shall
continue in effect and shall survive (among other events) any termination of
this Agreement, payment and satisfaction of the Note, and release of any
Collateral.
SECTION 5.12. PRIVATE PLACEMENT. Within one month from the date hereof,
consummate the tender offer set forth in that certain Confidential Private
Placement Memorandum with PaineWebber Incorporated.
SECTION 5.13. COMMITMENT FEE AND FACILITY FEE. Pay to Lender (a) on or
before the date of this Agreement, a one-time commitment fee for the Loan and
the other financial accommodations being extended to Borrower on this date in
the amount of $5,000 and (b) a quarterly fee (the "Facility
-13-
<PAGE>
Fee") at the applicable rate set forth below which fee is payable quarterly in
advance commencing on the date hereof and on the first day of each fiscal
quarter thereafter:
(i) in the event that Connecticut Natural Gas Corporation's debt
rating by Standard and Poor's Corporation is BBB, the Facility Fee shall be
equal to six-tenths of one percent (.6%) of the maximum availability under
the Revolving Credit Commitment, as the same shall have been reduced in
accordance with the provisions hereof; or
(ii) in the event that Connecticut Natural Gas Corporation's debt
rating by Standard and Poor's Corporation is BBB+ or better, the Facility
Fee shall be equal to forty-five one hundredths of one percent (.45%) of
the maximum availability under the Revolving Credit Commitment, as the same
shall have been reduced in accordance with the provisions hereof.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, until payment and satisfaction in full
of the principal of, and interest on, the Note and any other indebtedness,
obligation or liability of Borrower to Lender, whether now existing or arising
hereafter, and termination of the loan facility evidenced by the Loan Documents,
Borrower will not, directly or indirectly:
SECTION 6.01. INDEBTEDNESS. Incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any indebtedness, obligation or
liability or permit any of its subsidiaries to incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any indebtedness,
obligation or liability, except for:
(a) indebtedness to Lender;
(b) indebtedness with respect to trade obligations and other normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which it is contesting in good faith the amount or validity thereof
by appropriate proceedings, and then only to the extent it has set aside on its
books adequate reserves therefor;
(c) indebtedness for which Borrower has received the prior written
consent of Lender, which consent shall not be unreasonably withheld;
(d) the indebtedness set forth on the Schedule of Existing
Indebtedness attached hereto and made a part hereof; and
(e) other indebtedness for borrowed money not in excess of $1,000,000
outstanding at any time; and
-14-
<PAGE>
(f) up to $45,000,000 in 6.99% Senior Secured Notes due 2009 to be
issued prior to October 31, 1997.
SECTION 6.02. LIENS. Create, incur, assume or otherwise permit to exist
any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever
on any of its assets, now or hereafter owned by Borrower, except for:
(a) liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which it shall have set aside on its books adequate reserves;
(b) deposits under worker's compensation, unemployment insurance and
social security laws, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(c) liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by it in good faith in the ordinary course of
business, and liens arising out of a judgment or award against it with respect
to which it shall currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(d) liens in favor of Lender;
(e) the liens set forth on the Schedule of Existing Liens attached
hereto and made a part hereof; and
(f) liens (including liens securing obligations in respect of capital
leases) to secure indebtedness incurred in connection with the financing of all
or part of the purchase price or cost of improvement of property acquired or
improved by the Company or any of its subsidiaries after the date hereof,
provided that the indebtedness secured by said liens is permitted by Section
6.01 hereof.
SECTION 6.03. GUARANTEES. Without the consent of the Lender, which shall
not be unreasonably withheld, guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, except endorsements of
negotiable instruments for collection in the ordinary course of business.
SECTION 6.04. DISPOSITION OF ASSETS. Sell, lease, transfer or otherwise
dispose of its material properties, assets, rights, licenses and franchises to
any person, except for sales of inventory in the ordinary course of its
business, or turn over the management of, or enter a management contract with
respect to, such material properties, assets, rights, licenses and franchises,
PROVIDED, HOWEVER, that the sales of KBC and ENServe, Incorporated shall be
permitted under this Section 6.04.
SECTION 6.05. SALE AND LEASEBACKS. Enter into any arrangement, directly
or indirectly, with any person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property.
-15-
<PAGE>
SECTION 6.06. INVESTMENTS. Purchase, invest in or otherwise acquire or
hold securities, including, without limitation, capital stock and evidences of
indebtedness of, or make loans or advances to, but excluding from such
prohibition commercial paper rated A/2 or P-2 or better and Euro-Time deposits,
or enter into any arrangement for the purpose of providing funds or credit to,
any other person, except:
(a) advances to employees for business expenses or for personal needs
not to exceed Five Thousand Dollars ($5,000) in the case of any one (1) employee
and not to exceed Fifty Thousand Dollars ($50,000) in the aggregate to all such
employees outstanding at one time; and
(b) investments in certificates of deposit issued by Lender or in
short-term obligations of the United States.
SECTION 6.07. FUNDAMENTAL CHANGES. Dissolve, liquidate, merge,
consolidate or otherwise alter or modify Borrower's corporate name, mailing
address, principal place of business, structure, status or existence.
SECTION 6.08. DIVIDENDS. Pay any dividends, or make any distribution of
cash or property, or both, to holders of shares of its capital stock, or
directly or indirectly, redeem, purchase or otherwise acquire for a
consideration, any shares of its capital stock, of any class, unless such would
not significantly alter Borrower's financial capabilities or cause a default
under a covenant contained in this Agreement.
SECTION 6.09. ACCOUNTS RECEIVABLE. Sell, assign, pledge, discount or
dispose in any way of any accounts receivable, promissory notes or trade
acceptances held by Borrower, with or without recourse, except for collection
(including endorsements) in the ordinary course of business.
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
assets or the rendering or accepting of any service with or to any subsidiary or
affiliate of Borrower except in the ordinary course of business and pursuant to
the reasonable requirements of Borrower's business and upon terms not less
favorable to Borrower than it could obtain in a comparable arm's-length
transaction with a third party other than such subsidiary or affiliate.
SECTION 6.11. ERISA. (a) Fail, or permit any Commonly Controlled Entity
to fail, to comply with the requirements of ERISA with respect to any Employee
Benefit Plan; (b) permit any funded Employee Pension Plan to lose its qualified
status under Section 401(a) or 403(a) of the Code; (c) fail, or permit any
Commonly Controlled Entity to fail, to meet the minimum funding standards of
Section 302 of ERISA and Section 412 of the Code; (d) fail, or permit any
Commonly Controlled Entity to fail, to discharge any obligations to the PBGC
with respect to the termination of an Employee Pension Plan or to any
Multiemployer Plan on account of its withdrawal or partial withdrawal therefrom
or allow to exist any event or condition which presents a substantial risk of
Borrower incurring liability to the PBGC by reason of the termination of any
Employee Pension Plan; (e) create or adopt, or permit any Commonly Controlled
Entity to create or adopt, any new Employee Pension Plan which would
significantly alter Borrower's financial capabilities or cause a default under a
covenant contained in this Agreement without the prior written consent of
Lender; (f) modify, or permit any Commonly
-16-
<PAGE>
Controlled Entity to modify, any existing Employee Pension Plan so as to
increase its obligations thereunder which would significantly alter Borrower's
financial capabilities or cause a default under a covenant contained in this
Agreement, except in the ordinary course of business consistent with past
practice or with the prior written consent of Lender; (g) create or adopt any
new Employee Welfare Plan or modify any existing Employee Welfare Plan, or
permit any Commonly Controlled Entity to create or adopt any new Employee
Welfare Plan or modify any existing Employee Welfare Plan, to provide continuing
benefits or coverage for any participant (or beneficiary) after the termination
of the participant's employment except as may be required by COBRA, regulations
thereunder or applicable state statutory law which would significantly alter
Borrower's financial capabilities or cause a default under a covenant contained
in this Agreement or with the prior written consent of Lender; or (h) engage, or
permit any Commonly Controlled Entity to engage, in any transaction which would
reasonably result in the assessment of a direct or indirect liability to
Borrower or any Commonly Controlled Entity under Section 409 or 502 of ERISA or
Section 4975 of the Code.
SECTION 6.12. NEGATIVE PLEDGE. Without Lender's consent, which shall not
be unreasonably withheld, (a) sell, transfer, pledge or assign any shares of
stock or other ownership interests in Borrower or any of its subsidiaries or (b)
execute or agree to any further negative pledges of such shares of stock or
other ownership interests in Borrower or any of its subsidiaries. Lender
acknowledges and agrees that Borrower has pledged the stock of its subsidiaries
to State Street Bank and Trust Company, as collateral agent for Lender, The Bank
of Nova Scotia and the purchasers of the Borrowers 6.99% Senior Notes due 2006.
ARTICLE VII
-----------
DEFAULTS; RIGHTS AND REMEDIES OF LENDER UPON DEFAULT
----------------------------------------------------
SECTION 7.01. EVENTS OF DEFAULT. In each case of happening of any of the
following events (each of which is herein and in the Note and Security Documents
sometimes called an "Event of Default"):
(a) failure of Borrower to pay, after the expiration of any
applicable grace period, any installment of the principal of, or interest on,
the Note or any other indebtedness, obligation or liability of Borrower to
Lender, whether now existing or hereafter arising, when the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment or by acceleration or otherwise;
(b) failure of Borrower to perform, comply or observe any term,
covenant, condition or agreement applicable to Borrower contained in Articles
IV, V or VI hereof or in the Note;
(c) failure of Borrower to perform, comply with or observe any other
term, covenant, condition or agreement applicable to Borrower pursuant to the
terms hereof (other than as set forth in any other paragraph of this Article
VII), and such default shall continue unremedied for thirty (30) days after the
delivery of written notice thereof by Lender to Borrower;
-17-
<PAGE>
(d) any representation or warranty made in this Agreement, any other
Loan Document or any other report, certificate, financial statement or other
instrument furnished in connection with this Agreement, or the borrowing
hereunder, shall be untrue or misleading in any material respect as of the date
such representation or warranty was made or is deemed to have been made;
(e) the occurrence of a default or event of default with respect to
any evidence of indebtedness of Borrower (other than to Lender), in excess of
one million dollars ($1,000,000), if the effect of such default is to accelerate
the maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof, or if any such
indebtedness of Borrower is not paid when due and payable, whether at the due
date thereof or by acceleration or otherwise;
(f) the occurrence of an "Event of Default" as defined in any
Security Document;
(g) Borrower shall (i) discontinue or abandon operation of its
business, (ii) apply for or consent to or suffer the appointment of a receiver,
trustee, custodian or liquidator of it or any of its property, (iii) admit in
writing its inability to pay its debts as they mature, (iv) make a general
assignment for the benefit of creditors, (v) file a petition for relief under
Title 11 of the United States Code or (vi) file a petition in bankruptcy, or a
petition or an answer seeking reorganization or an arrangement with creditors or
to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or if corporate action shall be taken for the purpose of effecting any
of the foregoing, (vi) become insolvent, (vii) fail to generally pay its debts
as they mature or (viii) have liabilities which exceed the fair value of its
assets;
(h) there shall be filed against Borrower an involuntary petition
seeking reorganization of Borrower or the appointment of a receiver, trustee,
custodian or liquidator of Borrower or any material part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect;
(i) any judgment or court order for the payment of money in excess of
an aggregate of one million dollars ($1,000,000) shall be rendered against
Borrower in any twelve (12) month period, and either the same shall remain
undischarged for a period of thirty (30) consecutive days, or execution shall
have issued in respect thereof;
(j) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the occurrence of
any attachment of any other property of Borrower in the aggregate amount
exceeding one million dollars ($1,000,000) in any twelve (12) month period and
either the same shall remain undischarged for a period of thirty (30)
consecutive days, or execution shall have issued in respect thereof;
(k) the occurrence of any event or condition described in paragraph
(e), (g), (h), (i) or (j) of this Article VII with respect to Guarantor or any
other entity liable, in whole or in part, for payment or performance hereof or
of the Note;
-18-
<PAGE>
(l) for any reason, any Security Document (including, without
limitation, the Guaranty) at any time shall not be in full force and effect in
all material respects or shall not be enforceable in all material respects in
accordance with its terms, or any material security interest or lien granted
pursuant thereto shall fail to be perfected, or any person (other than Lender)
shall contest the validity, enforceability or perfection of any material lien
granted pursuant thereto, or any party thereto (other than Lender) shall seek to
disaffirm, terminate, limit or reduce its obligations under any Security
Document; or
(m) for any reason, Guarantor shall give notice of Guarantor's
attempt or intent to terminate the Guaranty and/or said entity shall be in
default of its own obligations to Lender; or
(n) Borrower suffers or sustains a Material Adverse Change or Lender
in good faith determines that the prospect of repayment of the Note is
materially impaired; or
(o) for any reason, the ratio of (x) the total debt (the sum of all
short term debt, current maturities of long term indebtedness (CMLTD) and
long-term debt) of CTG Resources, Inc. (the parent of Borrower) to (y) the
capitalization of CTG Resources, Inc., exceeds 70% in any two consecutive fiscal
quarters; or
(p) any operating subsidiary of CTG Resources, Inc. fails to maintain
a Standard and Poor's Corporation debt rating at least equal to "BBB",
THEN, upon the occurrence of any such Event of Default which has not been cured
by Borrower or waived in writing by Lender, Lender may, by notice to Borrower,
terminate this Agreement and declare the Note and any and all other liabilities,
indebtedness and obligations of Borrower to Lender to be immediately due and
payable, both as to principal and interest, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Note or other evidence of such indebtedness,
obligations and liabilities to the contrary notwithstanding (except with respect
to any Event of Default set forth in Section 7.01(g), in which case this
Agreement shall automatically terminate and the Note and all other indebtedness,
obligations and liabilities of Borrower to Lender shall automatically become
immediately due and payable without the necessity of any notice or demand). In
the event of an acceleration of Borrower's indebtedness hereunder as a result of
the filing of an involuntary petition as specified in paragraph (h) of this
Article VII, such acceleration shall be rescinded, and Borrower's rights
hereunder reinstated, if, within sixty (60) days following the filing of such
involuntary petition, such involuntary petition shall have been dismissed, and
there shall then exist no other Event of Default. Lender may enforce payment of
the same and exercise any or all of the rights, powers and remedies possessed by
Lender, under this Agreement, the Security Documents or under any agreement
securing the obligations of Borrower hereunder, whether afforded by the Uniform
Commercial Code or otherwise afforded by law or in equity. The remedies
provided for herein are cumulative and are not exclusive of any other remedies
provided by law. Borrower agrees to pay Lender's reasonable attorneys' fees and
legal expenses incurred in enforcing Lender's rights, powers and remedies under
this Agreement, the Note, the Security Documents and any other agreement
securing the liabilities, indebtedness or obligations of Borrower to Lender.
SECTION 7.02. DEFAULT RATE; LATE CHARGE. Without regard to whether Lender
has exercised any other rights or remedies hereunder, if Lender has accelerated
amounts owing under the Note
-19-
<PAGE>
following the occurrence of an Event of Default, the applicable interest rate
under the Note shall be increased, to the extent permitted by law, to a rate per
annum equal to the Default Rate (as defined in the Note). In addition, if the
entire amount of any required principal and/or interest payment is not paid in
full within ten (10) days after the same is due, Borrower shall pay to Lender a
late fee equal to five percent (5%) of the required payment.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
SECTION 8.01. INCREASED COSTS - CAPITAL. If Lender shall have determined
that the adoption of any applicable law, rule, regulation, guideline, directive
or request (whether or not having force of law) regarding capital requirements,
or the interpretation or administration thereof, by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any of the foregoing with
respect to this Loan imposes or increases a requirement by Lender to allocate
capital resources to its commitments, including its obligations hereunder, which
has or would have the effect of reducing the return on Lender's capital to a
level below that which Lender could have achieved (taking into consideration
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of Lender's capital) but for such adoption, change or
compliance by any amount deemed by Lender to be material, then, in each such
case: (i) Lender shall promptly after its determination of such occurrence give
notice thereof to Borrower; and (ii) Borrower shall pay to Lender as an
additional fee from time to time on demand such amount as Lender certifies to be
the amount that will compensate it for such reduction. A certificate of Lender
claiming compensation under this Section shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to be paid to
it hereunder and the method by which such amounts were determined. In
determining such amounts, Lender may use any reasonable averaging and
attribution methods.
SECTION 8.02. SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties herein and in the certificates delivered pursuant
hereto, shall survive the making by Lender of the Loan, the execution and
delivery to Lender of the Note, and shall continue in full force and effect so
long as the Note and any other indebtedness of Borrower to Lender is outstanding
and unpaid; PROVIDED, HOWEVER, that the provisions of Section 5.11(c) hereof
shall survive payment and satisfaction of the Note.
SECTION 8.03. EXPENSES. Borrower will reimburse Lender upon demand for
all out-of-pocket costs, charges and expenses of Lender (including costs of
searches of public records and filing and recording documents with public
offices and fees and disbursements of counsel to Lender, which fees and
disbursements are capped at $20,000) in connection with (a) the preparation,
execution and delivery of this Agreement, the Note, the Security Documents and
any other Loan Documents, (b) the making of the Loan, (c) any amendments,
modifications, consents or waivers in respect thereof and (d) any enforcement
thereof.
SECTION 8.04. GOVERNING LAW. THIS AGREEMENT, THE NOTE AND THE
ADMINISTRATION THEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
-20-
<PAGE>
GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SAID STATE.
SECTION 8.05. AMENDMENTS; ETC.. No amendment or waiver of any provision
of this Agreement, or of the Note, or of any of the Security Documents, no
consent to any departure therefrom, shall be effective unless the same shall be
in writing and signed by Lender. A written amendment, consent or waiver shall
be effective only in the specific instance, and for the purpose, for which
given. No notice to, or demand, on Borrower, in any one case, shall entitle
Borrower to any other or future notice or demand in the same, similar or other
circumstances.
SECTION 8.06. WAIVER. Neither any failure nor any delay on the part of
Lender in exercising any right, power or privilege hereunder, or under the Note,
or any Security Document shall operate as a waiver thereof, nor shall a single
or partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
SECTION 8.07. NOTICES. All notices and correspondence hereunder shall be
in writing and sent by certified or registered mail, return receipt requested,
or by overnight delivery service, with all charges prepaid, to the applicable
party at its respective address set forth below, or by facsimile transmission
(including, without limitation, computer generated facsimile), promptly
confirmed in writing sent by first class mail, to the FAX numbers and the
addresses set forth below:
if to Lender:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
FAX No.:(617) 364-0580
with a copy to:
Justin M. Sullivan, Esq.
Edwards & Angell
750 Main Street
Hartford, Connecticut 06103
FAX No.: (860) 547-1035
if to Borrower:
The Energy Network, Inc.
P.O. Box 1500
Hartford, Connecticut 06144-1500
Attn: Mr. Andrew Johnson, Treasurer and CAO
FAX No.: (860) 727-3064
with a copy to:
-21-
<PAGE>
Murtha, Cullina, Richter and Pinney
City Place I
185 Asylum Street
Hartford, Connecticut 06103
Attn: William F. Pinney, Jr., Esquire
FAX No.: (860) 240-6150
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices and correspondence shall be deemed given upon
the earlier to occur of (i) actual receipt, (ii) if sent by certified or
registered mail, three (3) business days after being post-marked, (iii) if sent
by overnight delivery service, when received at the above stated addresses or
when delivery is refused or (iv) if sent by facsimile transmission, when receipt
of such transmission is acknowledged.
SECTION 8.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the right to assign
this Agreement or any interest herein without the prior written consent of
Lender. Lender may, without the consent of Borrower, assign or participate to
one or more banks or financial institutions all or a portion of Lender's rights
and obligations under this Agreement, the Note and the Security Documents.
SECTION 8.09. CONSENT TO JURISDICTION. Borrower hereby submits to the
jurisdiction of the courts of the State of Connecticut and the United States
District Court for the District of Connecticut, as well as to the jurisdiction
of all courts from which an appeal may be taken or other review sought from the
aforesaid courts, for the purpose of any suit, action or other proceeding
arising out of any of Borrower's obligations under or with respect to this
Agreement, the Note, the Security Documents or any of the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
SECTION 8.10. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
OF THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS OR ANY OTHER
AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN). No party to this
Agreement, including BUT NOT LIMITED TO any assignee of or successor to Borrower
or Lender, shall seek a jury trial in any lawsuit, proceeding, counterclaim, or
any other litigation procedure based upon, or arising out of, this Agreement,
the Note, the Security Documents or any related instruments or the relationship
between the parties. No party will seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury trial
cannot be or has not been waived. THE PROVISIONS OF THIS SECTION HAVE BEEN
FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO
NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED
-22-
<PAGE>
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
SECTION 8.11. SET-OFFS, ETC. Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim
Lender may otherwise have, Lender shall be entitled at its option and whether or
not fully secured, to offset balances held by it for the account of Borrower at
any of its offices, against any indebtedness or other fees or charges owed to
Lender hereunder if the same are not paid when due (regardless of whether such
balances are then due to Borrower) or if Borrower becomes insolvent, howsoever
evidenced, or if any Event of Default occurs, and that such offset balances may
be applied toward the payment of any indebtedness of Borrower to Lender, whether
or not such indebtedness or any part thereof shall then be due and whether or
not such indebtedness is otherwise fully secured, in which case Lender shall
promptly notify Borrower thereof; PROVIDED, HOWEVER, that Lender's failure to
give such notice shall not affect the validity of such set-off and application.
SECTION 8.12. SEVERABILITY. In case any provision of or obligation under
this Agreement or the Note or the other Loan Documents shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 8.13. SECTION HEADINGS. The Article and Section headings in this
Agreement are inserted for convenience of reference only and shall not in any
way affect the meaning or construction of any provision of this Agreement.
SECTION 8.14. INTEGRATION. This Agreement supersedes Borrower's
application for credit, any commitment letter and proposal letters in respect
hereof, and all other prior dealings between the parties hereto and their
respective agents, employees or officers with respect to the credit facilities
extended hereby, and this Agreement, together with the other Loan Documents,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof.
SECTION 8.15. WAIVER OF PREJUDGMENT REMEDIES. BORROWER AND EACH GUA-
RANTOR ACKNOWLEDGE THAT THE LOAN EVIDENCED BY THE NOTE AND SECURED BY THE
SECURITY DOCUMENTS IS A COMMERCIAL TRANSACTION AND THEY AND EACH OF THEM, HEREBY
VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHTS TO NOTICE AND HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES OR OTHER STATUTES AFFECTING PREJUDGMENT
REMEDIES AND AUTHORIZE LENDER'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT
REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF
THIS WAIVER.
-23-
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be
duly executed by their respective duly authorized officers, all as of the day
and year first above written.
LENDER:
FLEET NATIONAL BANK
By:
- ----------------------------------- -------------------------------------
Suresh V. Chivukula
Senior Vice President
BORROWER:
THE ENERGY NETWORK, INC.
By:
- ----------------------------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
-24-
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
Exhibit A - Form of 3-Year Revolving Credit Note
Exhibit B - Request for Advance
Exhibit C - Officer's Compliance Certificate
<PAGE>
EXHIBIT A
---------
[FORM OF SECURED REVOLVING CREDIT NOTE]
-------------------------------------
<PAGE>
EXHIBIT B
---------
REQUEST FOR ADVANCE
-------------------
[ ], 19[ ]
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
Ladies and Gentlemen:
Pursuant to the provisions of that certain 3-Year Revolving Credit
Agreement dated October 1, 1997, by and between The Energy Network, Inc.
("Borrower") and Fleet National Bank (the "Agreement"), the undersigned, as
borrower, hereby requests an Advance of $[ ] to be made on [ ], 19[ ], which
Advance shall be evidenced by the undersigned's Secured Revolving Credit Note
dated [ ]. The principal balance outstanding under said 3-Year Revolving Credit
Note, after taking into consideration the amount of the Advance requested
hereby, is $[ ].
The undersigned hereby represents and warrants that (i) no event has
occurred and is continuing, or would result from the proposed Advance, which
constitutes an "Event of Default", as that term is defined in the Agreement, or
would constitute such an "Event of Default" but for the requirement that notice
be given or time elapse, or both, and (ii) the representations and warranties in
Article III of the Agreement remain true and correct as of the date hereof,
except those set forth in Section 3.01. The undersigned further represents and
warrants that the financial condition of the undersigned has not materially
adversely changed since the submission of the undersigned's most recent
financial information to Fleet National Bank.
Very truly yours,
THE ENERGY NETWORK, INC.
By:
-------------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT C
---------
[FORM OF COMPLIANCE CERTIFICATE]
------------------------------
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
Ladies and Gentlemen:
As required by Section 5.04 of that certain 3-Year Revolving Credit
Agreement dated October 1, 1997, by and between The Energy Network, Inc.
("Borrower") and Fleet National Bank, a review of the activities of Borrower for
the fiscal quarter/fiscal year ended [__________] has been made under my
supervision with a view to determining whether Borrower has kept, observed,
performed and fulfilled all of its obligations under the Revolving Credit
Agreement and all other agreements or undertakings contemplated thereby.
The undersigned hereby certifies that the amounts set forth below, with
abbreviated descriptions, to the best of my information and belief, accurately
present amounts required to be calculated by various covenants of the Revolving
Credit Agreement as of the last day of the fiscal quarter/fiscal year noted
above and all terms used herein have the identical meaning as in the Revolving
Credit Agreement.
1. 5.08(B)(I) - TOTAL DEBT TO TANGIBLE NET WORTH
Total Debt _______________
Tangible Net Worth _______________
Ratio of Total Debt to Tangible Net Worth _______________
Maximum Permitted 2.25 to 1
2. 5.08(B)(II) - MINIMUM TANGIBLE NET WORTH
Tangible Net Worth _______________
Minimum Required 30,000,000
<PAGE>
3. 5.08(B)(III) DEBT SERVICE COVERAGE RATIO
EBITDA plus equity purchase funds _______________
Debt Service _______________
Debt Service Coverage Ratio _______________
Minimum Required 1.25 to 1
4. 5.08(B)(IV) INTEREST COVERAGE RATIO
EBIT _______________
Interest expense _______________
Interest Coverage Ratio _______________
Minimum Required 2.5 to 1
5. 7.01(O) CTG'S DEBT TO CAPITALIZATION
CTG total debt ________________
CTG capitalization ________________
CTG ratio of debt to capitalization ________________
Maximum Permitted 70%
6. 7.01(O) S&P RATING OF CTG OPERATING SUBSIDIARIES
Lowest Standard & Poor's debt rating of each
operating subsidiary of CTG ________________
Minimum Required BBB
The undersigned hereby further certifies that he/she has reviewed the terms
of the Revolving Credit Agreement and that, to the best of his/her knowledge, no
event has occurred which constitutes, or which with the passage of time or
service of notice, or both, would constitute, an Event of Default as defined in
the Revolving Credit Agreement.
Sincerely,
THE ENERGY NETWORK, INC.
By:
-------------------------------------
Title:
----------------------------------
-2-
<PAGE>
3-YEAR REVOLVING CREDIT NOTE
$10,000,000.00 October 1, 1997
Hartford, Connecticut
FOR VALUE RECEIVED, THE ENERGY NETWORK, INC., a Connecticut corporation with a
mailing address at P.O. Box 1500, Hartford, Connecticut 06114-1500 ("Borrower"),
hereby promises to pay to FLEET NATIONAL BANK, a national banking association
("Lender"), or to its order, at its office at One Federal Street, Boston,
Massachusetts 02110, the principal sum of up to Ten Million Dollars
($10,000,000.00), or so much thereof as has been advanced and not repaid, in
accordance with the provisions of a 3-Year Revolving Credit Agreement of even
date herewith between the Borrower and Lender (the "Loan Agreement") and which
is then outstanding under this Note, together with interest in arrears on the
unpaid principal balance from time to time outstanding from the date hereof
until the entire principal amount due hereunder is paid in full at the rates
hereinafter provided. Interest shall be calculated on the basis of the actual
number of days elapsed over a year of 360 days. Interest shall be payable
monthly, in arrears, on the first day of each month, or the next business day
thereafter if such day is not a business day, commencing November 1, 1997 and
continuing monthly thereafter until this Note is paid in full.
The maximum availability hereunder shall be reduced by $500,000 on January
1, 1998 and by an additional $500,000 on the first day of each fiscal quarter of
the Borrower thereafter. In the event the amount outstanding under this Note at
any time exceeds the maximum availability hereunder, Borrower shall be required
to pay down the Loan by such excess amount within ten (10) days after notice
thereof from the Lender. Advances hereunder shall be made on a revolving basis
and as principal is repaid to Lender, such sums may be re-advanced to the
Borrower in accordance with the provisions of the Loan Agreement, provided no
Event of Default has occurred under the Loan Agreement or hereunder. All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Loan Agreement.
This Note is secured, INTER ALIA, by certain "Security Documents" referred
to in the Loan Agreement, and is entitled to the benefits thereof.
INTEREST RATES
BORROWER'S OPTIONS. Subject to the provisions herein with regard to the
Default Rate, interest hereunder shall accrue at the following rates, at
Borrower's selection, subject to the conditions and limitations provided
for in this Note:
(i) in the event that the rating by Standard and Poor's Corporation on any
publicly rated debt of any CTG subsidiary is BBB, a LIBO Rate (as
hereinafter defined) plus 80 basis points (.80%), with each change in said
rate to be effective on the date of the commencement of each Interest
Period (as hereinafter defined) without notice to Borrower;
<PAGE>
(ii) in the event that the rating by Standard and Poor's Corporation on any
publicly rated debt or any CTG subsidiary is BBB+ or better, a LIBO Rate
plus 65 basis points (.65%), with each change in said rate to be effective
on the date of the commencement of each Interest Period without notice to
Borrower; or
(iii) a Bank Rate(as hereinafter defined).
In the event a LIBO Rate is unavailable for any reason, interest shall
accrue on the Loan at the Variable Rate (as hereinafter defined) unless Borrower
has selected a Bank Rate. Borrower's right to select an interest rate hereunder
shall cease during the continuance of an Event of Default, and, upon the
expiration of the Interest Period(s) for any Advance(s) then in existence, the
outstanding principal balance under this Note shall bear interest at the
Variable Rate until the Event of Default has been cured and Borrower makes an
effective interest rate selection. Borrower shall not be permitted to elect a
rate set forth in either subsection (i) or (ii) above in the event the debt
rating of Connecticut Natural Gas Corporation does not satisfy the condition for
such a rate.
SELECTION TO BE MADE. Borrower shall select, and thereafter may
change the selection of, the applicable interest rate, from the
alternatives otherwise provided for in this Note, by giving Lender a Notice
of Rate Selection prior to each Loan Advance, and by the times stated below
in the next paragraph.
NOTICE. A "Notice of Rate Selection" shall be a written notice, given
by cable, tested telex, telecopier (with authorized signature), or by
telephone if immediately confirmed by such a written notice, from an
Authorized Representative of Borrower which: (i) is irrevocable; (ii) is
received by Lender not later than 10:00 o'clock A.M. Eastern Time on or
before a Business Day for which the selection of Interest Period is to
apply.
IF NO NOTICE. If Borrower fails to select an interest rate option in
accordance with the foregoing prior to a Loan Advance, or prior to the last
day of the applicable Interest Period of an outstanding Advance, any new
Loan Advance made or any Advance for which the Interest Period is expiring
and an new interest rate is not selected by Borrower, shall be deemed to be
accruing interest at the rate based on the LIBO Rate, effective on the date
such new Loan Advance is made or upon the expiration of the existing
Interest Period.
MATURITY DATE
So long as no Event of Default (as hereinafter defined) occurs as a result
of which Lender declares this Note immediately due and payable, the unpaid
principal amount due hereunder and any interest then owing shall be payable in
full on September 30, 2000 (the "Maturity Date").
-2-
<PAGE>
PREPAYMENT
The Loan or any portion thereof may be prepaid in full or in part without
premium or penalty at any time if interest is accruing at the Variable Rate or
on the last day of any Interest Period upon five (5) days' prior written notice
to the holder of this Note. Prepayments at any other time shall be subject to
the payment of a Prepayment Premium. Any partial prepayment of principal shall
first be applied to any installment of principal then due and then be applied to
the principal due in the reverse order of maturity, and no such partial
prepayment shall relieve Borrower of the obligation to pay each subsequent
installment of principal when due.
Borrower shall pay to Lender all reasonable costs and expenses incurred by
Lender in connection with such prepayment and such charges will be paid by
Borrower whether payment is made voluntarily at Borrower's option or
involuntarily after Lender has made demand for payment after an Event of
Default.
IN THE EVENT THAT INTEREST IS ACCRUING HEREUNDER AT A LIBO RATE OR A BANK
RATE AND BORROWER PREPAYS THE LOAN AT ANY TIME OTHER THAN AT THE END OF AN
INTEREST PERIOD, BORROWER SHALL BE REQUIRED TO PAY A PREPAYMENT PREMIUM (THE
"PREPAYMENT PREMIUM") TO LENDER IN AN AMOUNT COMPUTED AS FOLLOWS: THE CURRENT
TREASURY RATE WITH A MATURITY DATE CLOSEST TO THE LAST DAY OF APPLICABLE
INTEREST PERIOD TO WHICH THE PREPAYMENT IS MADE SHALL BE SUBTRACTED FROM THE
COST OF FUNDS COMPONENT OF THE LIBO RATE IN EFFECT AT THE TIME OF PREPAYMENT.
IF THE RESULT IS ZERO OR A NEGATIVE NUMBER, THERE SHALL BE NO PREPAYMENT
PREMIUM. IF THE RESULT IS A POSITIVE NUMBER, THEN THE RESULTING PERCENTAGE
SHALL BE MULTIPLIED BY THE AMOUNT OF THE PRINCIPAL BALANCE BEING PREPAID. THE
RESULTING AMOUNT SHALL BE DIVIDED BY 360 AND MULTIPLIED BY THE NUMBER OF DAYS
REMAINING IN THE INTEREST PERIOD AS TO WHICH THE PREPAYMENT IS MADE. SAID
AMOUNT SHALL BE REDUCED TO PRESENT VALUE CALCULATED BY USING THE NUMBER OF DAYS
REMAINING IN THE INTEREST PERIOD AND USING THE TREASURY RATE. THE RESULTING
AMOUNT SHALL BE THE PREPAYMENT PREMIUM DUE TO LENDER UPON PREPAYMENT OF THE
LOAN. IF BY REASON OF AN EVENT OF DEFAULT LENDER ELECTS TO DECLARE THIS NOTE TO
BE IMMEDIATELY DUE AND PAYABLE, THEN ANY PREPAYMENT PREMIUM WITH RESPECT TO THIS
NOTE SHALL BECOME DUE AND PAYABLE IN THE SAME MANNER AS THOUGH BORROWER HAD
EXERCISED SUCH RIGHT OF PREPAYMENT.
CERTAIN DEFINITIONS AND PROVISIONS RELATING TO INTEREST RATE.
(a) BANKING DAY. The term "Banking Day" means a day on which banks are
not required or authorized by law to close in the city in which Lender's
principal office is situated.
(b) BANK RATE. The term "Bank Rate" means a rate of interest based on, but
not equal to, the Lender's cost of funds as such Bank Rate may be quoted by
Lender to Borrower upon Borrower's request therefor.
(c) BUSINESS DAY; SAME CALENDAR MONTH. The term "Business Day" means any
Banking Day and, if the applicable Business Day relates to the selection or
determination of any LIBO Rate, any London Banking Day. If any day on which a
payment is due is not a Business Day, then the payment shall be due on the next
day following which is a Business Day, unless, with
-3-
<PAGE>
respect to a LIBO Rate, the effect would be to make the payment due in the next
calendar month, in which event such payment shall be due on the next preceding
day which is a Business Day. Further, if there is no corresponding day for a
payment in the given calendar month (i.e., there is no "February 30th"), the
payment shall be due on the last Business Day of the calendar month.
(d) DOLLARS. The term "Dollars" or "$" means lawful money of the United
States.
(e) INTEREST PERIOD.
(i) The term "Interest Period" means with respect to the LIBO Rate:
a period of three (3) months, subject to availability. Each such Interest
Period shall commence on a Business Day and shall end on the numerically
corresponding day in the third month thereafter. PROVIDED, HOWEVER: (i) if
there is no such numerically corresponding day (I.E., there is no February
30th), such Interest Period shall end on the last Business Day of the
applicable month, (ii) if the last day of such an Interest Period would
otherwise occur on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day; but (iii) if such
extension would otherwise cause such last day to occur in a new calendar
month, then such last day shall occur on the next preceding Business Day.
(ii) The term "Interest Period" shall mean with respect to the
Variable Rate consecutive periods of one (1) day each.
(iii) The term "Interest Period" shall mean with respect to a Bank
Rate the maturity of the cost of funds liability on which such Bank Rate is
based.
(iv) No Interest Period may end beyond the Maturity Date. If the
last day of an Interest Period would otherwise occur on a day which is not
a Business Day, such last day shall be extended to the next succeeding
Business Day, except as provided above in clause (i) relative to a LIBO
Rate.
(f) LIBO RATE. The term "LIBO Rate" means, with respect to each LIBO Rate
Interest Period, the rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined on the basis of the offered rates for
deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page 3750 as of 11:00 a.m. London time on
the day that is two London Banking Days preceding the first day of such advance;
provided, however, if the rate described above does not appear on the Telerate
System on any applicable interest determination date, the LIBO Rate shall be the
rate (rounded upwards as described above, if necessary) for deposits in dollars
for a period substantially equal to the interest period on the Reuters Page
"LIBO" (or such other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two (2) London Banking Days prior to the beginning of such interest
period. "Banking Day" shall mean, in respect of any city, any date on which
commercial banks are open for business in that city.
-4-
<PAGE>
If both the Telerate and Reuters system are unavailable, then the rate for
that date will be determined on the basis of the offered rates for deposits in
U.S. dollars for a period of time comparable to the Interest Period for such
advance which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of the Interest Period for such advance as selected
by the Calculation Agent. The principal London office of each of the four major
London banks will be requested to provide a quotation for its U.S. dollar
deposit offered rate. If at least two such quotations are provided, the rate
for that date will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to the Interest Period for such advance
offered by major banks in New York City at approximately 11:00 a.m. New York
City time, on the day that its two London Banking Days preceding the first day
of the Interest Period for such advance. In the event that Lender is unable to
obtain any such quotation as provided above, it will be deemed that the LIBO
Rate cannot be determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a Reserve Percentage with respect to LIBOR deposits of Lender then
for any period during which such Reserve Percentage shall apply, the LIBO Rate
shall be equal to the amount determined above divided by an amount equal to 1
minus the Reserve Percentage.
(g) MATURITY. The term "Maturity" means the Maturity Date, or in any
instance, upon acceleration of the Loan, if the Loan has been accelerated by
Lender upon an Event of Default.
(h) PRESENT VALUE. The term "Present Value" means the value at the
applicable maturity discounted to the date of prepayment using the Treasury
Rate.
(i) PRIME RATE. The term "Prime Rate" means the per annum rate of
interest so designated from time to time by Lender as its prime rate. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer.
(j) TREASURY RATE. The term "Treasury Rate" means, as of the date of any
calculation or determination, the latest published rate for United States
Treasury Notes or Bills (but the rate on Bills issued on a discounted basis
shall be converted to a bond equivalent) as published weekly in the Federal
Reserve Statistical Release H.15(519) of Selected Interest Rates in an amount
which approximates (as determined by Lender) the amount (i) approximately
comparable to the portion of the Loan to which the Treasury Rate applies for the
Interest Period, or (ii) in the case of a prepayment, the amount prepaid and
with a maturity closest to the original maturity of the installment which is
prepaid in whole or in part.
(k) VARIABLE RATE. The term "Variable Rate" means a per annum rate equal
at all times to the Prime Rate, with changes therein to be effective
simultaneously with any change in the Prime Rate.
ADDITIONAL PROVISIONS RELATED TO INTEREST RATE SELECTION.
-5-
<PAGE>
(a) INCREASED COSTS. If, due to any one or more of: (i) the introduction
of any applicable law or regulation or any change (other than any change by way
of imposition or increase of reserve requirements already referred to in the
definition of LIBO Rate) in the interpretation or application by any authority
charged with the interpretation or application thereof of any law or regulation;
or (ii) the compliance with any guideline or request from any governmental
central bank or other governmental authority (whether or not having the force of
law), there shall be an increase in the cost to Lender of agreeing to make or
making, funding or maintaining LIBO Rate Loans, including without limitation
changes which affect or would affect the amount of capital or reserves required
or expected to be maintained by Lender, with respect to all or any portion of
the Loan, or any corporation controlling Lender, on account thereof, then
Borrower from time to time shall, upon written demand by Lender, pay Lender
additional amounts sufficient to indemnify Lender against any increased cost
actually incurred. A certificate as to the amount of the increased cost and the
reason therefor submitted to Borrower by Lender, in the absence of manifest
error, shall be conclusive and binding for all purposes.
(b) ILLEGALITY. Notwithstanding any other provision of this Note, if the
introduction of or change in or in the interpretation of any law, treaty,
statute, regulation or interpretation thereof shall make it unlawful, or any
central bank or government authority shall assert by directive, guideline or
otherwise, that it is unlawful, for Lender to make or maintain a LIBO Rate or
to continue to fund or maintain a LIBO Rate then, on written notice thereof and
demand by Lender to Borrower, (a) the obligation of Lender to make a LIBO Rate
available and to convert or continue any Loan advances at a LIBO Rate shall
terminate and (b) Borrower shall convert the interest rate to a Variable Rate.
(c) ADDITIONAL LIBO RATE CONDITIONS. The selection by Borrower of a LIBO
Rate and the maintenance of advances at such rate shall be subject to the
following additional terms and conditions:
(i) AVAILABILITY. If, before or after Borrower has selected to
take or maintain a LIBO Rate, Lender notifies Borrower that:
(A) dollar deposits in the amount and for the maturity
requested are not available to Lender in the London interbank market
at the rate specified in the definition of LIBO Rate set forth above,
or
(B) reasonable means do not exist for Lender to determine
the LIBO Rate for the amounts and maturity requested,
then the principal which would have been advanced at a LIBO Rate shall be
advanced at a Variable Rate.
(ii) PAYMENTS NET OF TAXES. All payments and prepayments of
principal and interest under this Note shall be made net of any taxes and
costs resulting from having principal outstanding at or computed with
reference to a LIBO Rate. Without limiting the generality of the preceding
obligation, illustrations of such taxes and costs are taxes, or the
withholding of amounts for taxes, of any nature whatsoever
-6-
<PAGE>
including income, excise, interest equalization taxes (other than United
States or state income taxes) as well as all levies, imposts, duties or
fees whether now in existence or as the result of a change in or
promulgation of any treaty, statute, regulation, or interpretation thereof
or any directive guideline or otherwise by a central bank or fiscal
authority (whether or not having the force of law) or a change in the basis
of, or the time of payment of, such taxes and other amounts resulting
therefrom.
DEFAULT
Upon the occurrence of any of the following (each of which events shall be
an Event of Default hereunder):
(i) the failure of Borrower to make any payment of principal or
interest hereunder within ten (10) days after the same is due, or
(ii) an Event of Default as described and defined in any of the Loan
Agreement, the Security Instruments or any instrument evidencing any
indebtedness of Borrower to Lender and the expiration of any period
provided in such instrument to cure such default,
then Lender may declare the entire unpaid principal balance hereunder
immediately due and payable without notice, demand or presentment and may
exercise any of its rights under the Security Instruments. In the event that
Lender or any subsequent holder of this Note shall exercise or endeavor to
exercise any of its remedies hereunder or under the Security Instruments,
Borrower shall pay on demand all reasonable costs and expenses incurred in
connection therewith, including, without limitation, reasonable attorney's fees
and Lender may take judgment for all such amounts in addition to all other sums
due hereunder.
LATE PAYMENT FEE
Irrespective of the exercise or nonexercise of any of the aforesaid rights,
if any monthly payment of principal or interest hereunder is not paid in full
within ten (10) days after the same is due, Borrower shall pay to Lender a
processing fee on such unpaid amount equal to five percent (5%) of such late
payment.
DEFAULT RATE OF INTEREST
Irrespective of the exercise or nonexercise of any of the aforesaid rights,
if Lender has accelerated amounts owing under the Note following the occurrence
of any Event of Default hereunder, from and after the date of such acceleration
interest rate charges hereunder shall be increased to the lesser of (i) the then
applicable interest rate charges plus four percent (4%) or (ii) the maximum rate
then permitted by law, until Lender is satisfied that the Event of Default has
been cured.
-7-
<PAGE>
MISCELLANEOUS
In the event that the holder of this Note shall exercise or endeavor to
exercise any of its remedies hereunder or under said Loan Agreement or any
agreements securing this Note, Borrower shall pay all reasonable costs and
expenses incurred in connection therewith, including without limitation,
reasonable attorneys' fees, and the holder hereof may take judgment for all such
amounts in addition to all other sums due hereunder.
Borrower hereby waives presentment, dishonor, protest and demand,
diligence, notice of protest, demand and of dishonor, and any other notice
otherwise required to be given under the law in connection with the delivery,
acceptance, performance, default, enforcement or collection of this Note, and
expressly agrees that this Note or any payment hereunder may be extended or
subordinated, by forbearance or otherwise, from time to time, without in any way
affecting the liability of Borrower. No consent or waiver by the holder hereof
with respect to any action or failure to act which, without such consent or
waiver, would constitute a breach of any provision of this Note, shall be valid
and binding unless in writing and signed by both Borrower and the holder hereof.
All agreements between Borrower and Lender are hereby expressly limited so
that in no contingency or event whatsoever whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise shall the amount paid
or agreed to be paid to Lender for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof, provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest, then this Note
shall be governed by such new law as of its effective date. If, from any
circumstance whatsoever, fulfillment of any provision hereof or of the Loan
Agreement or of any agreements securing this Note at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between Borrower and Lender.
Borrower expressly agrees that this Note, or any payment hereunder, may be
extended from time to time, without in any way affecting the liability of
Borrower. No unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in writing and signed
by Lender.
This Note shall be construed in accordance with and governed by the laws of
the State of Connecticut, except to the extent that such laws are superseded by
Federal enactments.
-8-
<PAGE>
WAIVER OF PREJUDGMENT RIGHTS AND JURY TRIAL
BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS
A COMMERCIAL TRANSACTION, AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES AS
THE SAME ARE OR IN THE FUTURE MAY BE AMENDED OR AS OTHERWISE ALLOWED BY ANY
STATE OR FEDERAL LAW OR THE CONSTITUTION OF CONNECTICUT OR THE UNITED STATES
WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO USE.
BORROWER HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON
OR WITH RESPECT TO THIS NOTE, THE LOAN AGREEMENT, THE SECURITY INSTRUMENTS OR
ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH. NEITHER
BORROWER NOR ANY ASSIGNEE OF OR SUCCESSOR TO THE BORROWER, SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR
PROCEEDING BASED UPON, OR ARISING OUT OF, THIS NOTE, THE LOAN AGREEMENT, THE
SECURITY INSTRUMENTS OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, OR ANY OF THEM. NO PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS WAIVER OF RIGHT TO JURY TRIAL HAVE BEEN DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS WAIVER OF RIGHT TO JURY TRIAL WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first above written.
WITNESS: THE ENERGY NETWORK, INC.
By:
- ---------------------------- ----------------------------------
Name:
Title:
-9-
<PAGE>
GUARANTY
This unconditional guaranty ("Guaranty") is given pursuant to the terms and
conditions of the (a) a certain 364-Day Credit Agreement and (b) a certain
3-Year Revolving Credit Agreement, each between THE ENERGY NETWORK, INC., a
Connecticut corporation with a mailing address at P.O. Box 1500, Hartford,
Connecticut 06114-1500 (the "Borrower") and FLEET NATIONAL BANK, a national
banking association with an office at One Federal Street, Boston, Massachusetts
02110 (the "Lender") of even date herewith (collectively, the "Loan Agreement")
executed in connection with (i) a certain 364-Day Revolving Credit Note and (ii)
a certain 3-Year Revolving Credit Note, each given by the Borrower to the order
of Lender of even date herewith and each in the original principal amounts of
$10,000,000 (collectively, the "Note"). Capitalized terms used herein which are
not otherwise specifically defined shall have the same meaning herein as in the
Loan Agreement.
FOR VALUE RECEIVED, and to induce Lender to extend credit to Borrower as
provided for in the Loan Agreement and the other Loan Documents, TEN
TRANSMISSION COMPANY, a Connecticut corporation, and THE HARTFORD STEAM COMPANY,
a Connecticut corporation, both having a mailing address at P.O. Box 1500,
Hartford, Connecticut 06114-1500, hereinafter called jointly, severally and
collectively "Guarantor", hereby unconditionally agree as follows:
1. GUARANTY. Guarantor, as a primary party and not merely as a surety,
unconditionally and irrevocably guarantees the following "Guaranteed
Obligations":
A. ALL OBLIGATIONS. The prompt and full payment (and not merely the
collectibility) performance and observance of all of the obligations, terms and
conditions to be paid, performed or observed by Borrower under the Loan
Agreement and each other Loan Document, each as the same may be hereafter
amended, modified, extended, renewed or recast, including, but not limited to
the payment of $20,000,000 together with interest and other charges thereon as
provided for in the Note and the Loan Agreement.
B. PAYMENT. The prompt and full payment, and not merely the
collectibility, of all principal, interest, fees and other charges when due
under the Note, the Loan Agreement, and each other Loan Document.
Upon any Event of Default under the Loan Agreement, or any of the
other Loan Documents, or if Lender has accelerated the Loan pursuant to a right
to do so under the Loan Agreement, Lender may at its option proceed directly and
at once, without further notice, against Guarantor hereunder, without proceeding
against Borrower, or any other person or other Collateral for the obligations
secured by this Guaranty. Any sums payable by Guarantor hereunder shall bear
interest at the Default Rate from the date of demand until the date paid.
If Borrower, or Guarantor if so required, shall fail or refuse to
perform or continue performance of all of the Obligations of the Loan Agreement
on the part of Borrower to be kept and performed, then, if an Event of Default
exists on account thereof under the Loan Agreement or this Guaranty, in addition
to any other rights and remedies which Lender may have hereunder
<PAGE>
or elsewhere, and not in limitation thereof, Lender, at Lender's option, may
exercise any or all of its rights and remedies under the Loan Agreement and each
other Loan Document. The amounts of any and all expenditures so made by Lender
for completion of the Improvements shall be immediately due and payable to
Lender by Guarantor together with interest thereon at the Default Rate from the
date of demand until the date paid.
This Guaranty shall survive and continue in full force and effect
beyond and after the payment and satisfaction of the Guaranteed Obligations and
the Obligations of Borrower in the event Lender is required to disgorge or
return any payment or property received as a result of any laws pertaining to
preferences, fraudulent transfers or fraudulent conveyances.
2. WAIVERS. Guarantor hereby waives and relinquishes to the fullest
extent now or hereafter not prohibited by applicable law:
(i) all suretyship defenses and defenses in the nature thereof;
(ii) any right or claim of right to cause a marshalling of the
assets of Borrower or of any Collateral, or to cause Lender to proceed
against any of the other security for the Guaranteed Obligations or the
Obligations of Borrower before proceeding under this Agreement against
Guarantor, or, if there shall be more than one Guarantor, to require Lender
to proceed against any other Guarantor or any of Guarantors in any
particular order;
(iii) until the full and Non-Contestable Payment (as defined in
Section 16.1 below) and satisfaction of all Obligations all rights and
remedies, including, but not limited to, any rights of subrogation,
contribution, reimbursement, exoneration or indemnification pursuant to any
agreement, express or implied, or now or hereafter accorded by applicable
law to indemnitors, guarantors, sureties or accommodation parties.
PROVIDED, HOWEVER, unless Lender otherwise expressly agrees in writing,
such waiver by any particular Guarantor shall not be effective to the
extent that by virtue thereof such Guarantor's liability under this
Guaranty or under any other Loan Document is rendered invalid, voidable, or
unenforceable under any applicable state or federal law dealing with the
recovery or avoidance of so-called preferences or fraudulent transfers or
conveyances or otherwise;
(iv) notice of the acceptance hereof, presentment, demand for
payment, protest, notice of protest, or any and all notice of nonpayment,
nonperformance, nonobservance or default, or other proof or notice of
demand whereby to charge Guarantor therefor;
(v) the pleading of any Statute of Limitations as a defense to
Guarantor's obligations hereunder; and
(vi) the right to a trial by jury in any matter related to this
Guaranty.
-2-
<PAGE>
3. CUMULATIVE RIGHTS. Lender's rights under this Agreement shall be in
addition to and not in limitation of all of the rights and remedies of Lender
under the Loan Documents. All rights and remedies of Lender shall be cumulative
and may be exercised in such manner and combination as Lender may determine.
4. NO IMPAIRMENT. The liability of Guarantor hereunder shall in no way
be limited or impaired by, and Guarantor hereby assents to and agrees to be
bound by, any amendment or modification of the provisions of the Loan Documents
to or with Lender by Borrower or any other Guarantor. In addition, the
liability of Guarantor under this Guaranty and the other Loan Documents shall in
no way be limited or impaired by:
(i) any extensions of time for performance required by any of the
Loan Documents;
(ii) any amendment to or modification of any of the Loan Documents;
(iii) the accuracy or inaccuracy of any of the representations or
warranties made by or on behalf of Borrower or Guarantor, under any Loan
Document or otherwise;
(iv) the release of Borrower or any other person or entity, from
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act, or otherwise;
(v) the filing of any bankruptcy or reorganization proceeding by or
against Borrower;
(vi) the release or substitution in whole or part of any collateral
or security for the Obligations or the Guaranteed Obligations;
(vii) the release of any other party now or hereafter liable upon or
in respect of this Guaranty or any of the other Loan Documents; or
(viii) the invalidity or unenforceability of all or any portion of any
of the Loan Documents as to Borrower or any other person or entity.
Any of the foregoing may be accomplished with or without notice to Borrower or
any Guarantor and with or without consideration.
5. DELAY NOT WAIVER. No delay on Lender's part in exercising any right,
power or privilege hereunder or under any of the Loan Documents shall operate as
a waiver of any such privilege, power or right. No waiver by Lender in any
instance shall constitute a waiver in any other instance.
6. WARRANTIES AND REPRESENTATIONS. Guarantor warrants and represents to
Lender for the express purpose of inducing Lender to enter into the Loan
Agreement, to make each Loan Advance, to accept this Guaranty, and to otherwise
complete the transactions contemplated by the Loan Agreement that as of the date
of this Guaranty, upon the date of each Loan Advance
-3-
<PAGE>
and at all times thereafter until the Loan is repaid and all Guaranteed
Obligations to Lender have been satisfied in full, as follows:
(i) NO VIOLATION. The payment and performance by Guarantor of
Guarantor's obligations under the this Guaranty do not and shall not
constitute a violation of any law, order, regulation, contract or agreement
to which Guarantor is a party or by which Guarantor or Guarantor's property
may be bound;
(ii) NO LITIGATION. There is no material litigation now pending or,
to the best of Guarantor's knowledge threatened in writing, against
Guarantor which, if adversely decided would materially impair the ability
of Guarantor to pay and perform Guarantor's obligations under this
Guaranty. There is no litigation (whether or not material) pending, or
threatened in writing, against Guarantor in which the amount in controversy
exceeds One Million Dollars ($1,000,000) which is not either: (i) covered
by adequate insurance, or (ii) previously disclosed in writing to Lender
together with a written explanation of why such litigation is not material.
(iii) ENTITY MATTERS. Each Guarantor is a duly organized, validly
existing corporation organized and in good standing under the laws of the
State of Connecticut, and duly qualified to do business and in good
standing under the laws of the State of Connecticut, has all requisite
power and authority to conduct its business and to own its property as now
conducted or owned, and is qualified to do business in all jurisdictions
where the nature and extent of its business is such that such qualification
is required by law.
(iv) VALID AND BINDING. Each of the Loan Documents to which
Guarantor is a party, constitutes such Guarantor's legal, valid and binding
obligation in accordance with the respective terms thereof, subject to
bankruptcy, insolvency and similar laws of general application affecting
the rights and remedies of creditors and with respect to the availability
of remedies of specific enforcement subject to the discretion of the court
before which proceedings therefor may be brought.
(v) SOLVENCY. Guarantor is solvent and is not rendered insolvent
by the obligations undertaken in this Guaranty. No Guarantor is
contemplating either the filing of a petition or proceeding under any state
or federal bankruptcy or insolvency or reorganization laws or the
liquidating of all or a major portion of such Guarantor's property except
as has been previously disclosed to Lender, and no Guarantor has any
knowledge of any such petition or proceeding being filed against such
Guarantor.
(vi) MATERIAL ECONOMIC BENEFIT. The granting of the Loan to
Borrower will constitute a material economic benefit to each Guarantor
inasmuch as Borrower is the corporate parent of each Guarantor.
-4-
<PAGE>
7. NOTICES. All notices shall be given in the manner provided for, and
shall be effective in accordance with the provisions of, Section 8.07 of the
Loan Agreement.
8. NO ORAL CHANGE. No provision of this Agreement may be changed,
waived, discharged, or terminated orally (in person or by telephone) or by any
other means except by an instrument in writing signed by the party against whom
enforcement of the change, waiver or discharge or termination is sought.
9. PARTIES BOUND; BENEFIT. This Agreement shall be binding upon
Guarantor and Guarantor's respective successors, assigns, heirs and personal
representatives and shall be for the benefit of Lender, and of any subsequent
holder of Lender's interest in the Loan and of any owner of a participation
interest therein. In the event the interest of Lender under the Loan Documents
is sold or transferred, then the liability of the Guarantor to Lender shall then
be in favor of both Lender originally named herein and each subsequent holder of
Lender's interest therein, to the extent of their respective interests.
10. JOINT AND SEVERAL. If there is more than one (1) Guarantor, the
obligations of each Guarantor and such Guarantor's respective successors,
assigns, heirs and personal representatives shall be and remain joint and
several. Each reference to Guarantor shall include each Guarantor separately as
well as all Guarantors collectively.
11. PARTIAL INVALIDITY. Each of the provisions hereof shall be
enforceable against Guarantor to the fullest extent now or hereafter not
prohibited by applicable law. The invalidity or unenforceability of any
provision hereof shall not limit the validity or enforceability of each other
provision hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall in all respects be governed by and construed and
enforced in accordance with the internal laws of the State of Connecticut,
without giving effect to principles of conflicts of law.
13. CONSENT TO JURISDICTION. Guarantor hereby irrevocably submits to the
nonexclusive personal jurisdiction of any Connecticut State Court or any Federal
Court sitting in Connecticut over any suit, action or proceeding arising out of
or relating to this Guaranty. Guarantor hereby agrees and consents that in
addition to any methods of service of process provided for under applicable law,
all service of process in any such suit, action or proceeding in any Connecticut
State or Federal Court sitting in Connecticut may be made by certified or
registered mail, return receipt requested, directed to Guarantor at the address
indicated in Section 7 above and service so made shall be deemed completed five
(5) days after the same shall have been so mailed.
14. Intentionally omitted.
-5-
<PAGE>
15. ADDITIONAL COVENANTS OF THE GUARANTORS.
15.1. GENERAL. Guarantor shall pay, perform, observe and comply with
all of the obligations, terms, covenants and conditions set forth in this
Guaranty and the other Loan Documents to which Guarantor is a party and by any
provisions of the Loan Agreement specifically applicable to Guarantor,
including, but not limited to the provisions requiring the Borrower to deliver
financial statements on a consolidated and consolidating basis.
15.2. PROHIBITED TRANSFERS. Without Lender's prior written consent
after full disclosure, Guarantor shall not transfer any material portion of
Guarantor's property, real or personal, or release any contract right or claim
which constitutes a material portion of Guarantor's net worth, either
voluntarily or involuntarily, absolutely or collaterally, without receiving full
fair market value therefor. Guarantor agrees that any transfer or release in
violation of the foregoing provision shall be deemed to have occurred with an
intent to defraud creditors. For purposes of the foregoing, the term "material"
shall be defined as any transfer or release involving more than ten percent
(10%) of Guarantor's net worth in any calendar year.
16. SUBORDINATION.
16.1. Any indebtedness of Borrower to Guarantor, or to any affiliated
entity, now or hereafter existing together with any interest thereon shall be,
and such indebtedness is, hereby deferred, postponed and subordinated to the
prior, full and Non-Contestable Payment and satisfaction of all Obligations of
Borrower to the Lender. Payment and satisfaction of Obligations shall be deemed
"Non-Contestable Payment" only upon such payment and satisfaction and the
expiration of all periods of time within which a claim for the recovery of a
preferential payment, or fraudulent conveyance, or fraudulent transfer, in
respect of payments received by Lender as to the Obligations could be filed or
asserted with: (A) no such claim having been filed or asserted, or (B) if so
filed or asserted, the final, non-appealable decision of a court of competent
jurisdiction denying the claim or assertion.
16.2. At all times until the full and Non-Contestable Payment and
satisfaction of the Obligations of Borrower to Lender with respect to the Loan
(and including interest accruing on the Note after the commencement of a case by
or against Borrower under the Bankruptcy Code now or hereafter in effect, which
interest the parties agree shall remain a claim that is prior and superior to
any claim of Guarantor or any affiliated entity notwithstanding any contrary
practice, custom or ruling in cases under the Bankruptcy Code, as now or
hereafter in effect, generally), Guarantor, and each affiliated entity, agrees
not to accept any payment or satisfaction for any kind of indebtedness of
Borrower to Guarantor, or any affiliated entity, and hereby assigns such
indebtedness to Lender including, but not limited to, the right to file proofs
of claim and to vote thereon in connection with any such case under the
Bankruptcy Code, as now or hereafter in effect, and the right to vote on any
plan of reorganization.
16.3. In addition to the foregoing, and not in limitation thereof,
any claims of Guarantor, or any affiliated entity, of subrogation, contribution,
reimbursement, exoneration, indemnification, or reimbursement arising out of any
payment made on this Guaranty, whether such claim is based upon an express or
implied contract, or operation of law, are hereby waived
-6-
<PAGE>
until the full and Non-Contestable Payment and satisfaction of all Obligations
of Borrower to Lender.
17. LEGAL FEES, COSTS AND EXPENSES. Each Guarantor further agrees to pay
upon demand all costs and expenses reasonably incurred by Lender or its
successors or assigns in connection with enforcing any of the rights or remedies
of Lender, or such successors or assigns, under or with respect to this Guaranty
including, but not limited to, attorneys' fees and the out-of-pocket expenses
and disbursements of such attorneys. Any such amounts which are not paid within
ten (10) days of demand therefor shall bear interest at the Default Rate from
the date of demand until paid.
18. SET-OFF. Guarantor hereby grants to Lender, a lien, security interest
and right of set-off as security for all liabilities and obligations to Lender,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time, without
demand or notice, Lender may set-off the same or any part thereof and apply the
same to any liability or obligation of Borrower and Guarantor even though
unmatured and regardless of the adequacy of any other collateral securing the
Loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE BORROWER OR GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
19. JURY TRIAL WAIVER. GUARANTOR AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND MAKE THE LOAN.
NEXT PAGE IS SIGNATURE PAGE
-7-
<PAGE>
Witness the execution and delivery hereof as an instrument under seal as of
the 1st day of October, 1997.
GUARANTORS:
TEN TRANSMISSION COMPANY
By:
- ----------------------------------- -------------------------------------
Witness Name:
--------------------------------
Title:
-------------------------------
THE HARTFORD STEAM COMPANY
By:
- ----------------------------------- -------------------------------------
Witness Name:
--------------------------------
Title:
-------------------------------
-8-
<PAGE>
364-DAY REVOLVING CREDIT AGREEMENT
----------------------------------
THIS 364-DAY REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of
the 1st day of October, 1997, by and between FLEET NATIONAL BANK, a national
banking association with an office at One Federal Street, Boston, Massachusetts
02110 ("Lender"), and THE ENERGY NETWORK, INC., a Connecticut corporation with a
mailing address at P.O. Box 1500, Hartford, Connecticut 06114-1500 ("Borrower").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
Borrower has requested that Lender provide Borrower with a secured
revolving credit loan in the aggregate principal amount not to exceed Ten
Million Dollars ($10,000,000) at any time outstanding (the "Loan"), and Lender
has agreed to extend such Loan upon the terms and subject to the conditions
hereinafter set forth.
ARTICLE I
---------
DEFINITIONS
-----------
As used herein, the following terms shall have the indicated meanings:
"ADVANCE" shall mean an advance of all or some portion of the principal of
the Loan pursuant to Section 2.01 of this Agreement.
"AGREEMENT" shall mean this 364-Day Revolving Credit Agreement, as the same
may be supplemented, amended or restated from time to time.
"BORROWER" shall have the meaning specified in the Preamble to this
Agreement.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, a amended from time to
time.
"COLLATERAL" shall mean any and all assets, rights and interests in or to
property of Borrower or any other Person pledged or mortgaged to Lender, or in
which a security interest is granted to Lender, from time to time, as security
pursuant to the Security Documents, whether now owned or hereafter acquired.
"COMMONLY CONTROLLED ENTITY" shall have the meaning specified in Section
3.09(a) of this Agreement.
"COSTS" shall mean all costs and expenses incurred or to be incurred by
Lender or Borrower in connection with or incidental to the Loan including,
without limitation, filing fees, fees associated with UCC lien search reports,
legal fees, audit fees and all other costs and fees incurred in connection with
the Loan.
<PAGE>
"DEFAULT RATE" shall have the meaning specified in Section 7.02 of this
Agreement.
"EMPLOYEE BENEFIT PLAN" shall have the meaning specified in Section 3.09(b)
of this Agreement.
"EMPLOYEE WELFARE PLAN" shall mean an employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
"ENVIRONMENTAL REQUIREMENT(S)" shall mean any present or future law,
statute, ordinance, rule, regulation, order, code, license, permit, decree,
judgment, directive or the equivalent of or by any Governmental Authority and
relating to or addressing the protection of human health or the environment.
"ERISA" shall have the meaning specified in Section 3.09(b) of this
Agreement.
"EVENT OF DEFAULT" shall have the meaning specified in Section 7.01 of this
Agreement.
"FEES" shall mean the balance deficiency fee and the commitment fee payable
pursuant to Section 5.13 and Section 5.14 of this Agreement.
"FINANCIAL STATEMENTS" shall mean the balance sheet, income statement,
statement of cash flows and retained earnings statement of Borrower on a
consolidated and consolidating basis for the year or other period then ended,
together with supporting schedules, prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as promulgated or adopted by the Financial Accounting
Standards Board and in effect from time to time, consistently applied with past
Financial Statements of Borrower.
"GOVERNMENTAL AUTHORITY" shall mean the United States government, any state
or other political subdivision thereof, any agency, court or body of the United
States government, any state or other political subdivision thereof, or any
quasi-governmental agency or authority exercising executive, legislative,
judicial, regulatory or administrative functions.
"GUARANTOR" shall mean, jointly, severally and collectively, TEN
Transmission Company, The Hartford Steam Company, ENServe, Incorporated and ENI
Gas Services, Inc.
"GUARANTY" shall mean those certain unconditional and continuing guaranties
of each Guarantor of even date herewith in favor of Lender, as the same may be
supplemented or amended from time to time.
"HAZARDOUS MATERIAL" shall mean any material or substance (i) which,
whether by its nature or use, is now or hereafter defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any Environmental
Requirement, (ii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous to human health or
the environment, (iii) which is or contains petroleum or any fraction thereof,
including
-2-
<PAGE>
crude oil, heating oil, gasoline or diesel fuel, or (iv) the presence of which
requires investigation or remediation under any Environmental Requirement.
"LENDER" shall have the meaning specified in the Preamble to this
Agreement.
"LOAN" shall have the meaning specified in the Preamble to this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Security
Documents and all other documents or instruments executed and delivered by or on
behalf of Borrower in connection with the Loan and the transactions contemplated
hereby, as the same may be supplemented or amended from time to time.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower or (ii) the Collateral, in each
case as determined by Lender in its sole discretion.
"MATURITY DATE" shall mean September 29, 1998.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NOTE" shall mean the $10,000,000 364-Day Revolving Credit Note of even
date herewith in the form attached hereto as EXHIBIT A, made by Borrower in
favor of Lender to evidence the Loan, as the same may be supplemented or amended
from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"REVOLVING CREDIT COMMITMENT" shall have the meaning specified in Section
2.01 of this Agreement.
"SECURED PARTIES" shall mean the Lender, the holders of the Borrower's
Senior Secured Notes Due 2009 issued as of October 1, 1997 and The Bank of Nova
Scotia, as issuer of that certain Irrevocable Standby Letter of Credit dated
March 20, 1996.
"SECURITY AGREEMENT" shall mean that certain Pledge and Assignment
Agreement made by Borrower in favor of State Street Bank and Trust Company, as
agent for the Secured Parties as the same may be supplemented or amended from
time to time.
"SECURITY DOCUMENTS" shall have the meaning set forth in Section 2.05 of
this Agreement.
-3-
<PAGE>
ARTICLE II
----------
GENERAL TERMS
-------------
SECTION 2.01. REVOLVING CREDIT LOAN. Subject to the terms and conditions
contained in this Agreement and provided neither an Event of Default nor any
event which with notice or lapse of time, or both, would constitute an Event of
Default hereunder, has occurred, Lender agrees to make loans to Borrower from
time to time until the Maturity Date on a revolving credit basis in an aggregate
principal amount not to exceed $10,000,000 (the "Revolving Credit Commitment").
Borrower may request Advances from Lender in accordance with Section 2.03
hereof. Within the Revolving Credit Commitment, Borrower may borrow, repay
(without premium or penalty) and reborrow under the provisions of this Section
and Section 2.03. Each partial payment shall be in the amount of at least Ten
Thousand Dollars ($10,000). If at any time the outstanding principal balance of
the Advances exceeds the Revolving Credit Commitment, Borrower shall immediately
pay to Lender the amount of such excess. The Advances shall be evidenced by the
Note, which Note is hereby incorporated herein by reference and made a part
hereof.
SECTION 2.02. PAYMENTS OF PRINCIPAL AND INTEREST ON THE LOAN.
(a) Subject to Section 7.02 hereof, the outstanding unpaid principal
balance of the Advances shall bear interest at a rate per annum equal to either
(i) a LIBO Rate (as such term is defined in the Note) plus 60 basis points
(.6%), with each change in said rate to be effective on the date of the
commencement of each Interest Period (as defined in the Note) without notice to
Borrower or (ii) a Bank Rate (as such term is defined in the Note), as selected
by Borrower in accordance with the provisions of the Note. Interest will be
computed in arrears and based on a three hundred sixty (360) day year counting
the actual number of days elapsed. Interest on the outstanding principal
balance of the Advances will be paid monthly commencing on November 1, 1997, and
continuing on the same day of each successive month until the outstanding
principal balance of the Advances is paid in full and the Loan evidenced by the
Loan Documents is terminated. A final payment of all remaining principal and
accrued interest on the Loan will be made by Borrower to Lender on the Maturity
Date.
(b) All payments to be made by Borrower of principal of, and interest
on, the Note and all fees and other sums, costs, charges and expenses payable by
Borrower hereunder, may be made by Lender, at its option, debiting any demand
deposit account(s) of Borrower maintained with Lender, or in such other
reasonable manner as may be designated by Lender in writing to Borrower, and in
any event all such payments shall be made to Lender in U.S. dollars in
immediately available funds prior to 12:00 o'clock noon (Hartford time) on or
before the day that such payment is due. Any payments coming due on a Saturday,
Sunday or other day in which banks in the State of Connecticut are required to
be closed will be due on the next business day and such additional time will be
taken into account in computing interest thereon. Borrower hereby irrevocably
authorizes Lender to so debit its demand deposit account(s) maintained with
Lender and Lender shall be entitled to rely on this authorization.
-4-
<PAGE>
SECTION 2.03. ADVANCES UNDER THE LOAN. Borrower will open and maintain
with Lender an account. Advances under the Loan will be made by Lender to
Borrower upon telephonic request to credit such Advance to Borrower's account
made by an officer of Borrower who has been duly authorized by its board of
directors and whose name, along with a certified copy of such resolutions, has
been transmitted to Lender. Such request shall be confirmed in writing by
Lender's receipt, on the same day such request is received if such request was
received prior to 10:00 a.m. e.s.t., of a request for Advance in the form of
EXHIBIT B attached hereto, signed by a duly authorized officer of Borrower
indicating the date and amount of the Advance requested and acknowledging the
principal balance outstanding on the Loan, as of the said date after taking into
consideration the amount of the Advance as so requested.
SECTION 2.04. USE OF PROCEEDS. The proceeds of the Advances shall be used
exclusively by Borrower for short term working capital needs, general corporate
purposes and the payment of Costs.
SECTION 2.05. SECURITY. Payment and performance of the obligations,
indebtedness and liabilities of Borrower to Lender, whether under the Note or
otherwise, shall be secured by:
(a) a first priority security interest pursuant to the Security
Agreement shared PARI PASSU with the Secured Parties in (i) all equity
contributions made and to be made to the Borrower under that certain Forward
Equity Purchase Agreement between CTG Resources, Inc. and Borrower dated as of
October 1, 1997 (the "Forward Equity Purchase Agreement") and (ii) all of the
common stock of each Guarantor owned or hereafter acquired by Borrower;
(b) the Guaranty;
(c) the support letter from CTG Resources, Inc. in favor of Borrower
dated October 1, 1997; and
(d) such other security documents as may be required by Lender.
All agreements and instruments described in this Section 2.05, together
with any and all other agreements and instruments now or hereafter securing the
Note, are sometimes hereinafter referred to collectively as the "Security
Documents" and individually as a "Security Document".
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Loan,
Borrower hereby represents and warrants to Lender (which representations and
warranties shall survive the delivery of the Note and the making of the Loan)
that:
SECTION 3.01. FINANCIAL STATEMENTS. Borrower has heretofore furnished to
Lender Borrower's Financial Statements which fairly present the financial
condition of Borrower as of their date, and the results of its operations for
the year or other period then ended in conformity
-5-
<PAGE>
with GAAP. To the best of Borrower's knowledge and belief, Borrower does not
have any contingent obligations, liabilities for taxes or unusual forward or
long-term commitments except as specifically mentioned in the Financial
Statements. Since the date of the Financial Statements, there has been no
Material Adverse Change, and since that date, no dividends or other
distributions have been declared or paid or made to the stockholders of
Borrower.
SECTION 3.02. ORGANIZATION, ETC. Borrower (a) is duly organized, validly
existing and in good standing under the laws of its state of incorporation, (b)
is duly qualified to transact business in every jurisdiction where, because of
the nature of its business or property, such qualification is required; (c) has
full power and authority to own its property and assets and to carry on its
business as now being conducted and (d) has full power to execute, deliver and
perform its obligations under the Loan Documents to which it is a party.
SECTION 3.03. AUTHORIZATION, COMPLIANCE, ETC. The execution and delivery
of, and the performance by Borrower of its obligations under, the Loan Documents
(a) are within its corporate powers, (b) have been duly authorized by all
requisite corporate action, (c) do not and will not violate any provision of
law, any order of any court or other agency of government, or the corporate
charter or by-laws of Borrower, and (d) do not and will not violate any
indenture, agreement or other instrument to which it is a party, or by which it
is bound, or be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or except as may be provided
by this Agreement, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of
Borrower pursuant to, any such indenture, agreement or instrument. Borrower is
not required to obtain any consent, approval or authorization from, or to file
any declaration or statement with, any governmental instrumentality or other
agency in connection with or as a condition to the execution, delivery or
performance of the Loan Documents.
SECTION 3.04. LITIGATION. There is no action, suit or proceeding at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of Borrower, threatened against or affecting Borrower other than as
has been previously disclosed in writing to Lender.
SECTION 3.05. TITLE TO PROPERTIES. Borrower has good title to all of its
properties and assets, free and clear of all mortgages, security interests,
restrictions, liens and encumbrances of any kind, except liens permitted under
Section 6.02 hereof.
SECTION 3.06. BORROWER NOT AN INVESTMENT COMPANY. Borrower is not an
"investment company", or a company "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
SECTION 3.07. MARGIN STOCK. Borrower does not own or have any present
intention of acquiring, any "margin security" within the meaning of Regulation
G, or any "margin stock" within the meaning of Regulation U, of the Board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock"), nor does Borrower extend credit to others for the purpose of
purchasing or carrying such margin stock. None of the proceeds of the Loan will
be used, directly or indirectly, by Borrower for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry,
-6-
<PAGE>
any margin security or margin stock or for any other purpose which might
constitute the transactions contemplated hereby a "purpose credit" within the
meaning of said Regulation G or Regulation U, or cause this Agreement to violate
any other regulation of the Board of Governors of the Federal Reserve System or
the Securities Exchange Act of 1934, as amended, or any rules or regulations
promulgated under such statutes.
SECTION 3.08. FILING AND PAYMENT OF TAXES. Borrower has filed all
federal, state and local tax returns required to be filed, and has paid, or made
adequate provision for the payment of, all federal, state and local taxes,
charges and assessments.
SECTION 3.09. PENSION PLANS, ETC.
(a) PLANS. Except as set forth in a separate letter to Lender of
even date herewith and acknowledged by Lender in writing, neither Borrower nor
any entity with which Borrower would be aggregated (a "Commonly Controlled
Entity") under Section 414(b), (c), (m), or (o) of the Code, maintains or
contributes to any pension, profit sharing, or similar plan providing for a
program of deferred compensation to any employee or former employee.
(b) FUNDING OF EMPLOYEE BENEFIT PLANS. All contributions and other
payments required to be made by Borrower or any Commonly Controlled Entity to
all employee benefit plans, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which either
Borrower or any Commonly Controlled Entity maintains or maintained or to which
any of them contributes or has contributed (the "Employee Benefit Plans") have
been made or reserves adequate for such purposes has been set aside and reflect
on Borrower's financial statements. Except as provided in the following
sentence, no Employee Benefit Plan is a plan subject to Section 412 of the Code
or Section 302 of ERISA, nor is any Employee Benefit Plan a multiemployer plan
as defined in Section 4001(a)(3) of ERISA. The three defined benefit plans
maintained by the Borrower and its Commonly Controlled Entities are subject to
Section 412 of the Code and Section 302 of ERISA. Each other Employee Benefit
Plan which is an employee pension benefit plan, as defined in Section 3(2) of
ERISA, has been determined to be qualified under Section 401(a) or Section
403(a) of the Code and nothing has occurred which would cause the loss of such
qualification or the imposition of any tax liability or penalty under the Code
or ERISA on Borrower.
(c) ADMINISTRATION, ETC. Each Employee Benefit Plan has been and is
administered in accordance with its terms and applicable law. To its knowledge,
Borrower has not breached any fiduciary duty imposed on it under ERISA with
respect to any Employee Benefit Plan, or engaged in any prohibited transaction,
as defined in Title I of ERISA or Section 4975 of the Code, involving any
Employee Benefit Plan for which no exemption is available.
(d) WELFARE PLANS. No Employee Benefit Plan which is an employee
welfare benefit plan, as defined in Section 3(1) of ERISA, if any, provides for
continuing benefits or coverage for any participant (or beneficiary) after the
termination of the participant's employment except as may be required under
Section 4980B of the Code or applicable state statutory law, and except that
medical insurance is provided in certain instances.
-7-
<PAGE>
(e) CLAIMS. There are no claims (other than routine claims for
benefits), actions or lawsuits asserted or instituted with respect to, and
Borrower has no knowledge of any threatened claims or litigation with respect
to, any Employee Benefit Plan or any fiduciary thereof.
SECTION 3.10. ENVIRONMENTAL MATTERS. Borrower:
(a) Except as disclosed in the Annual Report on Form 10-K of the
Connecticut Natural Gas Corporation for the calendar year 1996, has not received
any notice, citation, summons, directive, order or other communication, written
or oral, from, and Borrower has no knowledge, after reasonable inquiry, of any
notice, citation, summons, directive, order or other communication by, any
Governmental Authority or any other person concerning the presence, generation,
treatment, storage, transportation, transfer, disposal, release or other
handling of any Hazardous Material within, on, from, related to, or affecting
any real property owned or occupied by Borrower; and
(b) Except as disclosed in the Annual Report on Form 10-K of the
Connecticut Natural Gas Corporation for the calendar year 1996, has no
knowledge, after reasonable inquiry, that any real property owned or occupied by
Borrower has ever been used either by Borrower, any tenant or any predecessor in
interest, to generate, treat, store, transport, transfer, dispose of, release or
otherwise handle any Hazardous Material, except in material compliance with all
Environmental Requirements.
SECTION 3.11. PATENTS, TRADEMARKS, ETC. Borrower owns or possesses all
the patents, trademarks, service marks, trade names, copyrights, consents and
licenses, and all rights with respect to the foregoing, necessary for the
current and currently planned future conduct of its business, without any known
conflict with the rights of others.
SECTION 3.12. FULL DISCLOSURE. Neither the Financial Statements referred
to in Section 3.01, nor any statement of fact made by or on behalf of Borrower
in this Agreement or any of the other Loan Documents or any certificate, written
statement or schedule furnished to Lender pursuant hereto, contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading.
SECTION 3.13. ENFORCEABILITY. This Agreement and all other Loan Documents
executed and delivered in connection herewith are legal, valid and binding
obligations of Borrower, and with respect to those Loan Documents executed and
delivered by Guarantor, of Guarantor, and are enforceable against Borrower and
Guarantor, as the case may be, in accordance with their terms except as such
enforceability may be limited by (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity.
SECTION 3.14. SOLVENCY. The fair saleable value of Borrower's assets
exceeds all probable liabilities of Borrower; Borrower does not have
unreasonably small capital in relation to the business in which it is or
proposes to be engaged; and Borrower has not incurred, nor believes that it will
incur after giving effect to the transactions contemplated by this Agreement,
debts beyond its ability to pay such debts as they become due.
-8-
<PAGE>
ARTICLE IV
----------
CONDITIONS OF MAKING THE LOAN
-----------------------------
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Lender to make the initial Advance hereunder is subject to the satisfaction of
the following conditions precedent:
(a) The representations and warranties set forth in Article III
hereof and in all other Loan Documents shall be true and correct.
(b) Borrower shall have executed and delivered to Lender, or caused
to be executed and delivered to Lender, on or prior to the date of execution of
this Agreement, each of the documents, opinions and certificates required by
Lender, each in scope, form and substance satisfactory to Lender in its sole
discretion, and all other documents reasonably necessary to consummate the
lending transactions contemplated hereby.
(c) All legal matters incident to the transactions hereby
contemplated shall be satisfactory to counsel for Lender.
(d) No Event of Default, nor any event which upon notice or lapse of
time, or both, would constitute such an Event of Default, shall have occurred
and be continuing.
SECTION 4.02. CONDITIONS PRECEDENT TO ADDITIONAL ADVANCES. The obligation
of Lender to make each Advance in connection with the Loan is subject to the
conditions precedent that, on the date of each such Advance:
(a) All representations and warranties set forth in Article III
hereof and in all other Loan Documents shall be true and accurate as of the date
each Advance is requested to be made, except with respect to the representations
and warranties in Section 3.01 of this Agreement as it relates to the Financial
Statements of the Borrower;
(b) No event has occurred and is continuing, or would result from the
making of the Advance, which constitutes an Event of Default hereunder or would
constitute such an Event of Default but for the requirement that notice be given
or time elapse, or both; and
(c) Borrower shall represent and warrant to Lender that the financial
condition of Borrower has not materially adversely changed since the submission
of Borrower's most recent financial information to Lender.
Each Request for Advance shall constitute a certificate by Borrower to such
effect.
-9-
<PAGE>
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of the principal
of, and interest on, the Note and any other indebtedness, obligation and
liability of Borrower to Lender under the Loan Documents, whether now existing
or arising hereafter, and termination of the loan facility evidenced by the Loan
Documents, Borrower will:
SECTION 5.01. PRESERVATION OF ASSETS; COMPLIANCE WITH LAW.
(a) Do or cause to be done all things reasonably necessary to
preserve, renew and keep in full force and effect its corporate existence,
rights, licenses, permits and franchises; at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
property used or useful in the conduct of its business and keep the same in good
repair, working order and condition, and from time to time, make, or cause to be
made, all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; and
(b) Comply with all applicable laws, rules, regulations and orders,
whether now in effect or hereafter enacted or promulgated by any Governmental
Authority.
SECTION 5.02. TAXES, ETC. Pay and discharge or cause to be paid and
discharged, when due, all taxes, assessments and governmental charges or levies
imposed upon it or upon its respective income and profits or upon any of its
property, real, personal or mixed, or upon any part thereof, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
might become a lien or charge upon such properties or any part thereof,
PROVIDED, HOWEVER, Borrower may contest in good faith any such taxes,
assessments and governmental charges or levies, and withhold payment thereof, if
Borrower properly commences and thereafter diligently pursues the contest.
SECTION 5.03. NOTICE OF PROCEEDINGS. Give prompt written notice to Lender
of any proceedings instituted against it by or in any Federal or state court or
before any commission or other regulatory body, whether Federal, state or local.
SECTION 5.04. FINANCIAL REPORTING. Furnish to Lender:
(a) Within ninety (90) days of the end of each fiscal year,
consolidated and consolidating Financial Statements certified (without
qualification) by independent certified public accountants selected by Borrower
and approved by Lender, showing the financial condition at the close of such
fiscal year, the results of operations during such year and containing a
statement to the effect that its independent public accountants have examined
the provisions of this Agreement and that no Event of Default, nor any event
which with notice or lapse of time, or both, would constitute such an Event of
Default, has occurred;
-10-
<PAGE>
(b) Within sixty (60) days after the end of each quarter in each such
fiscal year, consolidated and consolidating Financial Statements for such period
and the fiscal year to that date, subject to changes resulting from routine
year-end audit adjustments, in form satisfactory to Lender, prepared and
certified by the chief financial officer of Borrower to the best of his or her
information and belief;
(c) Simultaneously with the furnishing of each of the Financial
Statements to be delivered pursuant to subsections (a) and (b) above, a
certificate in the form of EXHIBIT C hereto and certified by the President or
chief financial officer of Borrower; and
(d) Promptly, from time to time such other information regarding its
operations, assets, business, affairs and financial condition or the operations,
assets, business, affairs and financial condition of any of its subsidiaries, as
Lender may reasonably request.
SECTION 5.05. VISITATION AND INSPECTION RIGHTS. Permit agents or
representatives of Lender to inspect and to discuss the affairs, finances and
accounts of Borrower with its officers, at any time and from time to time during
normal business hours upon twenty-four hours notice to Borrower, at Borrower's
reasonable expense after an Event of Default (including, without limitation, the
reasonable fees and expenses of such agents or representatives), (i) the
Collateral, and (ii) Borrower's books and records and to make abstracts or
reproductions thereof and to duplicate, reduce to hard copy or otherwise use any
and all computer or electronically stored information or data.
SECTION 5.06. NOTICE OF EVENT OF DEFAULT. Immediately advise Lender of
any Material Adverse Change, or of the occurrence of any Event of Default, or of
the occurrence of any event which upon notice or lapse of time or both would
constitute such an Event of Default.
SECTION 5.07. ACCOUNTING SYSTEM. Maintain a standard system of accounting
in accordance with GAAP.
SECTION 5.08. FINANCIAL COVENANTS.
(a) For purposes of this Section, the following terms shall have the
following definitions and any undefined terms shall be defined in accordance
with GAAP:
(i) "DEBT SERVICE" shall mean for any relevant accounting period the
aggregate amount of principal and interest payments due from Borrower with
respect to its Total Debt.
(ii) "DEBT SERVICE COVERAGE RATIO" shall mean for any relevant
accounting period the ratio of (x) earnings before interest, taxes ,
depreciation, amortization and dividends (EBITDA) plus amounts received
under the Forward Equity Purchase Agreement to (y) Debt Service.
(iii) "INTEREST COVERAGE RATIO" shall mean for any relevant
accounting period the ratio of (x) earnings before interest, taxes and
dividends (EBIT) plus amounts received
-11-
<PAGE>
under the Forward Equity Purchase Agreement to (y) the aggregate amount of
interest payments due from Borrower with respect to its Total Debt.
(iv) "SENIOR DEBT" shall mean the Loan, all debt secured PARI PASSU
with the Loan pursuant to the Collateral Agency Agreement and any other
indebtedness of Borrower owed to Lender.
(v) "TANGIBLE NET WORTH" shall mean the excess of Borrower's total
assets over its total liabilities computed in accordance with generally
accepted accounting principles consistently applied, less all intangible
assets and deferred charges, including, without limitation, goodwill,
unamortized debt discount, organization expenses, trademarks and trade
names, patents, deferred product development costs, the Borrower's
interests under the Forward Equity Purchase Agreement, and similar items.
(vi) "TOTAL DEBT" shall mean Senior Debt, as well as any of
Borrower's other loan or lease obligations then outstanding.
(b) At all times during the period the Loan is outstanding, Borrower
agrees to fulfill each of the following financial covenants:
(i) Not permit the ratio of Total Debt to Tangible Net Worth to
exceed the 2.25 to 1 on a consolidated basis, to be tested quarterly;
(ii) Not permit its Tangible Net Worth to be less than $30,00,000 on
a consolidated basis, to be tested annually;
(iii) Not permit its Debt Service Coverage Ratio to be less than 1.25
to 1, as tested quarterly; and
(iv) Not permit its Interest Coverage Ratio to be less than 2.5 to 1,
as tested quarterly.
SECTION 5.09. LENDER AS PRINCIPAL DEPOSITORY. Use Lender as the principal
depository of its funds.
SECTION 5.10. INSURANCE. Keep all of its insurable properties, now or
hereafter owned, adequately insured at all times against loss or damage by fire
or other casualty to the extent customary with respect to like properties of
companies conducting similar businesses; maintain public liability, business
interruption and worker's compensation insurance insuring Borrower to the extent
customary with respect to companies conducting similar businesses, all by
financially sound and reputable insurers.
SECTION 5.11. ENVIRONMENTAL INDEMNIFICATION. With respect to
environmental matters:
(a) comply strictly and in all material respects with all
Environmental Requirements, and cause all tenants or other occupants of any real
property which Borrower owns or occupies to
-12-
<PAGE>
comply, in all material respects with all Environmental Requirements, and not
generate, treat, store, handle, process, transfer, transport, dispose of,
release or otherwise use, and not permit any tenant or other occupant of such
property to generate, treat, store, handle, process, transfer, transport,
dispose of, release or otherwise use, Hazardous Materials within, on, under or
about such property in a manner that could lead to the imposition on Borrower,
Lender or any such real property of any liability or lien of any nature
whatsoever under any Environmental Requirement;
(b) notify Lender promptly in the event of any material spill or
other release of any Hazardous Material within, on, under or about any real
property owned or occupied by Borrower which is required to be reported to a
Governmental Authority under any Environmental Requirement, promptly forward to
Lender copies of any notices received by Borrower relating to alleged violation
of any Environmental Requirement and promptly pay when due any fine or
assessment against Borrower, Lender or any such real property relating to any
Environmental Requirement, PROVIDED, HOWEVER, Borrower may contest in good faith
any such fine or assessment, and withhold payment thereof, if Borrower properly
commences and thereafter diligently pursues the contest.; and
(c) indemnify, defend, and hold Lender harmless from and against any
claim, cost, damage (including, without limitation, consequential damages),
expenses (including, without limitation, attorneys' fees and expenses), loss,
liability, or judgment now or hereafter arising as a result of any claim for
environmental cleanup costs, any resulting damage to the environment and any
other environmental claims against Borrower, Lender, the Premises or any other
real property which Borrower owns or occupies. Notwithstanding anything
contained herein to the contrary, the provisions of this subparagraph (c) shall
continue in effect and shall survive (among other events) any termination of
this Agreement, payment and satisfaction of the Note, and release of any
Collateral.
SECTION 5.12. PRIVATE PLACEMENT. Within one month from the date hereof,
consummate the tender offer set forth in that certain Confidential Private
Placement Memorandum with PaineWebber Incorporated.
SECTION 5.13. COMMITMENT FEE. Pay to Lender (a) on or before the date of
this Agreement, a one-time commitment fee for the Loan and the other financial
accommodations being extended to Borrower on this date in the amount of $5,000
and (b) on or before the date of this Agreement and, in addition, prior to any
renewal of this Agreement, a facility fee in the amount of $37,500 (.375% of the
Revolving Credit Commitment).
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, until payment and satisfaction in full
of the principal of, and interest on, the Note and any other indebtedness,
obligation or liability of Borrower to Lender, whether now existing or arising
hereafter, and termination of the loan facility evidenced by the Loan Documents,
Borrower will not, directly or indirectly:
SECTION 6.01. INDEBTEDNESS. Incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any indebtedness, obligation or
liability or permit any of its subsidiaries to
-13-
<PAGE>
incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any indebtedness, obligation or liability, except for:
(a) indebtedness to Lender;
(b) indebtedness with respect to trade obligations and other normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which it is contesting in good faith the amount or validity thereof
by appropriate proceedings, and then only to the extent it has set aside on its
books adequate reserves therefor;
(c) indebtedness for which Borrower has received the prior written
consent of Lender, which consent shall not be unreasonably withheld;
(d) the indebtedness set forth on the Schedule of Existing
Indebtedness attached hereto and made a part hereof; and
(e) other indebtedness for borrowed money not in excess of $1,000,000
outstanding at any time; and
(f) up to $45,000,000 in 6.99% Senior Secured Notes due 2009 to be
issued prior to October 31, 1997.
SECTION 6.02. LIENS. Create, incur, assume or otherwise permit to exist
any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever
on any of its assets, now or hereafter owned by Borrower, except for:
(a) liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which it shall have set aside on its books adequate reserves;
(b) deposits under worker's compensation, unemployment insurance and
social security laws, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(c) liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by it in good faith in the ordinary course of
business, and liens arising out of a judgment or award against it with respect
to which it shall currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(d) liens in favor of Lender;
(e) the liens set forth on the Schedule of Existing Liens attached
hereto and made a part hereof; and
-14-
<PAGE>
(f) liens (including liens securing obligations in respect of capital
leases) to secure indebtedness incurred in connection with the financing of all
or part of the purchase price or cost of improvement of property acquired or
improved by the Company or any of its subsidiaries after the date hereof,
provided that the indebtedness secured by said liens is permitted by Section
6.01 hereof.
SECTION 6.03. GUARANTEES. Without the consent of the Lender, which shall
not be unreasonably withheld, guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, except endorsements of
negotiable instruments for collection in the ordinary course of business.
SECTION 6.04. DISPOSITION OF ASSETS. Sell, lease, transfer or otherwise
dispose of its material properties, assets, rights, licenses and franchises to
any person, except for sales of inventory in the ordinary course of its
business, or turn over the management of, or enter a management contract with
respect to, such material properties, assets, rights, licenses and franchises,
PROVIDED, HOWEVER, that the sales of KBC and ENServe, Incorporated shall be
permitted under this Section 6.04.
SECTION 6.05. SALE AND LEASEBACKS. Enter into any arrangement, directly
or indirectly, with any person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property.
SECTION 6.06. INVESTMENTS. Purchase, invest in or otherwise acquire or
hold securities, including, without limitation, capital stock and evidences of
indebtedness of, or make loans or advances to, but excluding from such
prohibition commercial paper rated A/2 or P-2 or better and Euro-Time deposits,
or enter into any arrangement for the purpose of providing funds or credit to,
any other person, except:
(a) advances to employees for business expenses or for personal needs
not to exceed Five Thousand Dollars ($5,000) in the case of any one (1) employee
and not to exceed Fifty Thousand Dollars ($50,000) in the aggregate to all such
employees outstanding at one time; and
(b) investments in certificates of deposit issued by Lender or in
short-term obligations of the United States.
SECTION 6.07. FUNDAMENTAL CHANGES. Dissolve, liquidate, merge,
consolidate or otherwise alter or modify Borrower's corporate name, mailing
address, principal place of business, structure, status or existence.
SECTION 6.08. DIVIDENDS. Pay any dividends, or make any distribution of
cash or property, or both, to holders of shares of its capital stock, or
directly or indirectly, redeem, purchase or otherwise acquire for a
consideration, any shares of its capital stock, of any class, unless such would
not significantly alter Borrower's financial capabilities or cause a default
under a covenant contained in this Agreement.
SECTION 6.09. ACCOUNTS RECEIVABLE. Sell, assign, pledge, discount or
dispose in any way of any accounts receivable, promissory notes or trade
acceptances held by Borrower, with or without recourse, except for collection
(including endorsements) in the ordinary course of business.
-15-
<PAGE>
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
assets or the rendering or accepting of any service with or to any subsidiary or
affiliate of Borrower except in the ordinary course of business and pursuant to
the reasonable requirements of Borrower's business and upon terms not less
favorable to Borrower than it could obtain in a comparable arm's-length
transaction with a third party other than such subsidiary or affiliate.
SECTION 6.11. ERISA. (a) Fail, or permit any Commonly Controlled Entity
to fail, to comply with the requirements of ERISA with respect to any Employee
Benefit Plan; (b) permit any funded Employee Pension Plan to lose its qualified
status under Section 401(a) or 403(a) of the Code; (c) fail, or permit any
Commonly Controlled Entity to fail, to meet the minimum funding standards of
Section 302 of ERISA and Section 412 of the Code; (d) fail, or permit any
Commonly Controlled Entity to fail, to discharge any obligations to the PBGC
with respect to the termination of an Employee Pension Plan or to any
Multiemployer Plan on account of its withdrawal or partial withdrawal therefrom
or allow to exist any event or condition which presents a substantial risk of
Borrower incurring liability to the PBGC by reason of the termination of any
Employee Pension Plan; (e) create or adopt, or permit any Commonly Controlled
Entity to create or adopt, any new Employee Pension Plan which would
significantly alter Borrower's financial capabilities or cause a default under a
covenant contained in this Agreement without the prior written consent of
Lender; (f) modify, or permit any Commonly Controlled Entity to modify, any
existing Employee Pension Plan so as to increase its obligations thereunder
which would significantly alter Borrower's financial capabilities or cause a
default under a covenant contained in this Agreement, except in the ordinary
course of business consistent with past practice or with the prior written
consent of Lender; (g) create or adopt any new Employee Welfare Plan or modify
any existing Employee Welfare Plan, or permit any Commonly Controlled Entity to
create or adopt any new Employee Welfare Plan or modify any existing Employee
Welfare Plan, to provide continuing benefits or coverage for any participant (or
beneficiary) after the termination of the participant's employment except as may
be required by COBRA, regulations thereunder or applicable state statutory law
which would significantly alter Borrower's financial capabilities or cause a
default under a covenant contained in this Agreement or with the prior written
consent of Lender; or (h) engage, or permit any Commonly Controlled Entity to
engage, in any transaction which would reasonably result in the assessment of a
direct or indirect liability to Borrower or any Commonly Controlled Entity under
Section 409 or 502 of ERISA or Section 4975 of the Code.
SECTION 6.12. NEGATIVE PLEDGE. Without Lender's consent, which shall not
be unreasonably withheld, (a) sell, transfer, pledge or assign any shares of
stock or other ownership interests in Borrower or any of its subsidiaries or (b)
execute or agree to any further negative pledges of such shares of stock or
other ownership interests in Borrower or any of its subsidiaries. Lender
acknowledges and agrees that Borrower has pledged the stok of its subsidiaries
to State Street Bank and Trust Company, as collateral agent for Lender, The Bank
of Nova Scotia and the purchasers of the Borrower's 6.99% Senior Notes due 2009.
-16-
<PAGE>
ARTICLE VII
-----------
DEFAULTS; RIGHTS AND REMEDIES OF LENDER UPON DEFAULT
----------------------------------------------------
SECTION 7.01. EVENTS OF DEFAULT. In each case of happening of any of the
following events (each of which is herein and in the Note and Security Documents
sometimes called an "Event of Default"):
(a) failure of Borrower to pay, after the expiration of any
applicable grace period, any installment of the principal of, or interest on,
the Note or any other indebtedness, obligation or liability of Borrower to
Lender, whether now existing or hereafter arising, when the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment or by acceleration or otherwise;
(b) failure of Borrower to perform, comply or observe any term,
covenant, condition or agreement applicable to Borrower contained in Articles
IV, V or VI hereof or in the Note;
(c) failure of Borrower to perform, comply with or observe any other
term, covenant, condition or agreement applicable to Borrower pursuant to the
terms hereof (other than as set forth in any other paragraph of this Article
VII), and such default shall continue unremedied for thirty (30) days after the
delivery of written notice thereof by Lender to Borrower;
(d) any representation or warranty made in this Agreement, any other
Loan Document or any other report, certificate, financial statement or other
instrument furnished in connection with this Agreement, or the borrowing
hereunder, shall be untrue or misleading in any material respect as of the date
such representation or warranty was made or is deemed to have been made;
(e) the occurrence of a default or event of default with respect to
any evidence of indebtedness of Borrower (other than to Lender), in excess of
one million dollars ($1,000,000), if the effect of such default is to accelerate
the maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof, or if any such
indebtedness of Borrower is not paid when due and payable, whether at the due
date thereof or by acceleration or otherwise;
(f) the occurrence of an "Event of Default" as defined in any
Security Document;
(g) Borrower shall (i) discontinue or abandon operation of its
business, (ii) apply for or consent to or suffer the appointment of a receiver,
trustee, custodian or liquidator of it or any of its property, (iii) admit in
writing its inability to pay its debts as they mature, (iv) make a general
assignment for the benefit of creditors, (v) file a petition for relief under
Title 11 of the United States Code or (vi) file a petition in bankruptcy, or a
petition or an answer seeking reorganization or an arrangement with creditors or
to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or if corporate action shall be taken for the purpose of effecting any
of the foregoing, (vi) become insolvent, (vii) fail to generally pay its debts
as they mature or (viii) have liabilities which exceed the fair value of its
assets;
-17-
<PAGE>
(h) there shall be filed against Borrower an involuntary petition
seeking reorganization of Borrower or the appointment of a receiver, trustee,
custodian or liquidator of Borrower or any material part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect;
(i) any judgment or court order for the payment of money in excess of
an aggregate of one million dollars ($1,000,000) shall be rendered against
Borrower in any twelve (12) month period, and either the same shall remain
undischarged for a period of thirty (30) consecutive days, or execution shall
have issued in respect thereof;
(j) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the occurrence of
any attachment of any other property of Borrower in the aggregate amount
exceeding one million dollars ($1,000,000) in any twelve (12) month period and
either the same shall remain undischarged for a period of thirty (30)
consecutive days, or execution shall have issued in respect thereof;
(k) the occurrence of any event or condition described in paragraph
(e), (g), (h), (i) or (j) of this Article VII with respect to Guarantor or any
other entity liable, in whole or in part, for payment or performance hereof or
of the Note;
(l) for any reason, any Security Document (including, without
limitation, the Guaranty) at any time shall not be in full force and effect in
all material respects or shall not be enforceable in all material respects in
accordance with its terms, or any material security interest or lien granted
pursuant thereto shall fail to be perfected, or any person (other than Lender)
shall contest the validity, enforceability or perfection of any material lien
granted pursuant thereto, or any party thereto (other than Lender) shall seek to
disaffirm, terminate, limit or reduce its obligations under any Security
Document; or
(m) for any reason, Guarantor shall give notice of Guarantor's
attempt or intent to terminate the Guaranty and/or said entity shall be in
default of its own obligations to Lender; or
(n) Borrower suffers or sustains a Material Adverse Change or Lender
in good faith determines that the prospect of repayment of the Note is
materially impaired; or
(o) for any reason, the ratio of (x) the total debt (the sum of all
short term debt, current maturities of long term indebtedness (CMLTD) and
long-term debt) of CTG Resources, Inc. (the parent of Borrower) to (y) the
capitalization of CTG Resources, Inc., exceeds 70% in any two consecutive fiscal
quarters; or
(p) any operating subsidiary of CTG Resources, Inc. fails to maintain
a Standard and Poor's Corporation debt rating at least equal to "BBB",
THEN, upon the occurrence of any such Event of Default which has not been cured
by Borrower or waived in writing by Lender, Lender may, by notice to Borrower,
terminate this Agreement and declare the Note and any and all other liabilities,
indebtedness and obligations of Borrower to Lender to be immediately due and
payable, both as to principal and interest, without presentment, demand, protest
or
-18-
<PAGE>
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Note or other evidence of such indebtedness, obligations and
liabilities to the contrary notwithstanding (except with respect to any Event of
Default set forth in Section 7.01(g), in which case this Agreement shall
automatically terminate and the Note and all other indebtedness, obligations and
liabilities of Borrower to Lender shall automatically become immediately due and
payable without the necessity of any notice or demand). In the event of an
acceleration of Borrower's indebtedness hereunder as a result of the filing of
an involuntary petition as specified in paragraph (h) of this Article VII, such
acceleration shall be rescinded, and Borrower's rights hereunder reinstated, if,
within sixty (60) days following the filing of such involuntary petition, such
involuntary petition shall have been dismissed, and there shall then exist no
other Event of Default. Lender may enforce payment of the same and exercise any
or all of the rights, powers and remedies possessed by Lender, under this
Agreement, the Security Documents or under any agreement securing the
obligations of Borrower hereunder, whether afforded by the Uniform Commercial
Code or otherwise afforded by law or in equity. The remedies provided for
herein are cumulative and are not exclusive of any other remedies provided by
law. Borrower agrees to pay Lender's reasonable attorneys' fees and legal
expenses incurred in enforcing Lender's rights, powers and remedies under this
Agreement, the Note, the Security Documents and any other agreement securing the
liabilities, indebtedness or obligations of Borrower to Lender.
SECTION 7.02. DEFAULT RATE; LATE CHARGE. Without regard to whether Lender
has exercised any other rights or remedies hereunder, if Lender has accelerated
amounts owing under the Note following the occurrence an Event of Default, the
applicable interest rate under the Note shall be increased, to the extent
permitted by law, to a rate per annum equal to the Default Rate (as defined in
the Note). In addition, if the entire amount of any required principal and/or
interest payment is not paid in full within ten (10) days after the same is due,
Borrower shall pay to Lender a late fee equal to five percent (5%) of the
required payment.
-19-
<PAGE>
ARTICLE VIII
------------
MISCELLANEOUS
-------------
SECTION 8.01. INCREASED COSTS - CAPITAL. If Lender shall have determined
that the adoption of any applicable law, rule, regulation, guideline, directive
or request (whether or not having force of law) regarding capital requirements,
or the interpretation or administration thereof, by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any of the foregoing with
respect to this Loan imposes or increases a requirement by Lender to allocate
capital resources to its commitments, including its obligations hereunder, which
has or would have the effect of reducing the return on Lender's capital to a
level below that which Lender could have achieved (taking into consideration
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of Lender's capital) but for such adoption, change or
compliance by any amount deemed by Lender to be material, then, in each such
case: (i) Lender shall promptly after its determination of such occurrence give
notice thereof to Borrower; and (ii) Borrower shall pay to Lender as an
additional fee from time to time on demand such amount as Lender certifies to be
the amount that will compensate it for such reduction. A certificate of Lender
claiming compensation under this Section shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to be paid to
it hereunder and the method by which such amounts were determined. In
determining such amounts, Lender may use any reasonable averaging and
attribution methods.
SECTION 8.02. SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties herein and in the certificates delivered pursuant
hereto, shall survive the making by Lender of the Loan, the execution and
delivery to Lender of the Note, and shall continue in full force and effect so
long as the Note and any other indebtedness of Borrower to Lender is outstanding
and unpaid; PROVIDED, HOWEVER, that the provisions of Section 5.11(c) hereof
shall survive payment and satisfaction of the Note.
SECTION 8.03. EXPENSES. Borrower will reimburse Lender upon demand for
all out-of-pocket costs, charges and expenses of Lender (including costs of
searches of public records and filing and recording documents with public
offices and fees and disbursements of counsel to Lender, which fees and
disbursements are capped at $20,000) in connection with (a) the preparation,
execution and delivery of this Agreement, the Note, the Security Documents and
any other Loan Documents, (b) the making of the Loan, (c) any amendments,
modifications, consents or waivers in respect thereof and (d) any enforcement
thereof.
SECTION 8.04. GOVERNING LAW. THIS AGREEMENT, THE NOTE AND THE
ADMINISTRATION THEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF CONNECTICUT APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SAID STATE.
SECTION 8.05. AMENDMENTS; ETC.. No amendment or waiver of any provision
of this Agreement, or of the Note, or of any of the Security Documents, no
consent to any departure therefrom, shall be effective unless the same shall be
in writing and signed by Lender. A written amendment,
-20-
<PAGE>
consent or waiver shall be effective only in the specific instance, and for the
purpose, for which given. No notice to, or demand, on Borrower, in any one
case, shall entitle Borrower to any other or future notice or demand in the
same, similar or other circumstances.
SECTION 8.06. WAIVER. Neither any failure nor any delay on the part of
Lender in exercising any right, power or privilege hereunder, or under the Note,
or any Security Document shall operate as a waiver thereof, nor shall a single
or partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
SECTION 8.07. NOTICES. All notices and correspondence hereunder shall be
in writing and sent by certified or registered mail, return receipt requested,
or by overnight delivery service, with all charges prepaid, to the applicable
party at its respective address set forth below, or by facsimile transmission
(including, without limitation, computer generated facsimile), promptly
confirmed in writing sent by first class mail, to the FAX numbers and the
addresses set forth below:
if to Lender:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
FAX No.:(617) 364-0580
with a copy to:
Justin M. Sullivan, Esq.
Edwards & Angell
750 Main Street
Hartford, Connecticut 06103
FAX No.: (860) 547-1035
if to Borrower:
The Energy Network, Inc.
P.O. Box 1500
Hartford, Connecticut 06144-1500
Attn: Mr. Andrew Johnson, Treasurer and CAO
FAX No.: (860) 727-3064
with a copy to:
-21-
<PAGE>
Murtha, Cullina, Richter and Pinney
City Place I
185 Asylum Street
Hartford, Connecticut 06103
Attn: William F. Pinney, Jr., Esquire
FAX No.: (860) 240-6150
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices and correspondence shall be deemed given upon
the earlier to occur of (i) actual receipt, (ii) if sent by certified or
registered mail, three (3) business days after being post-marked, (iii) if sent
by overnight delivery service, when received at the above stated addresses or
when delivery is refused or (iv) if sent by facsimile transmission, when receipt
of such transmission is acknowledged.
SECTION 8.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the right to assign
this Agreement or any interest herein without the prior written consent of
Lender. Lender may, without the consent of Borrower, assign or participate to
one or more banks or financial institutions all or a portion of Lender's rights
and obligations under this Agreement, the Note and the Security Documents.
SECTION 8.09. CONSENT TO JURISDICTION. Borrower hereby submits to the
jurisdiction of the courts of the State of Connecticut and the United States
District Court for the District of Connecticut, as well as to the jurisdiction
of all courts from which an appeal may be taken or other review sought from the
aforesaid courts, for the purpose of any suit, action or other proceeding
arising out of any of Borrower's obligations under or with respect to this
Agreement, the Note, the Security Documents or any of the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
SECTION 8.10. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
OF THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS OR ANY OTHER
AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN). No party to this
Agreement, including BUT NOT LIMITED TO any assignee of or successor to Borrower
or Lender, shall seek a jury trial in any lawsuit, proceeding, counterclaim, or
any other litigation procedure based upon, or arising out of, this Agreement,
the Note, the Security Documents or any related instruments or the relationship
between the parties. No party will seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury trial
cannot be or has not been waived. THE PROVISIONS OF THIS SECTION HAVE BEEN
FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO
NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED
-22-
<PAGE>
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
SECTION 8.11. SET-OFFS, ETC. Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim
Lender may otherwise have, Lender shall be entitled at its option and whether or
not fully secured, to offset balances held by it for the account of Borrower at
any of its offices, against any indebtedness or other fees or charges owed to
Lender hereunder if the same are not paid when due (regardless of whether such
balances are then due to Borrower) or if Borrower becomes insolvent, howsoever
evidenced, or if any Event of Default occurs, and that such offset balances may
be applied toward the payment of any indebtedness of Borrower to Lender, whether
or not such indebtedness or any part thereof shall then be due and whether or
not such indebtedness is otherwise fully secured, in which case Lender shall
promptly notify Borrower thereof; PROVIDED, HOWEVER, that Lender's failure to
give such notice shall not affect the validity of such set-off and application.
SECTION 8.12. SEVERABILITY. In case any provision of or obligation under
this Agreement or the Note or the other Loan Documents shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 8.13. SECTION HEADINGS. The Article and Section headings in this
Agreement are inserted for convenience of reference only and shall not in any
way affect the meaning or construction of any provision of this Agreement.
SECTION 8.14. INTEGRATION. This Agreement supersedes Borrower's
application for credit, any commitment letter and proposal letters in respect
hereof, and all other prior dealings between the parties hereto and their
respective agents, employees or officers with respect to the credit facilities
extended hereby, and this Agreement, together with the other Loan Documents,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof.
SECTION 8.15. WAIVER OF PREJUDGMENT REMEDIES. BORROWER AND EACH GUA-
RANTOR ACKNOWLEDGE THAT THE LOAN EVIDENCED BY THE NOTE AND SECURED BY THE
SECURITY DOCUMENTS IS A COMMERCIAL TRANSACTION AND THEY AND EACH OF THEM, HEREBY
VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHTS TO NOTICE AND HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES OR OTHER STATUTES AFFECTING PREJUDGMENT
REMEDIES AND AUTHORIZE LENDER'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT
REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF
THIS WAIVER.
-23-
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be
duly executed by their respective duly authorized officers, all as of the day
and year first above written.
LENDER:
FLEET NATIONAL BANK
By:
- ----------------------------------- -------------------------------------
Suresh V. Chivukula
Senior Vice President
BORROWER:
THE ENERGY NETWORK, INC.
By:
- ----------------------------------- -------------------------------------
Name:
Title:
-24-
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
Exhibit A - Form of Secured Revolving Credit Note
Exhibit B - Request for Advance
Exhibit C - Officer's Compliance Certificate
<PAGE>
EXHIBIT A
---------
[FORM OF SECURED REVOLVING CREDIT NOTE]
-------------------------------------
<PAGE>
EXHIBIT B
---------
REQUEST FOR ADVANCE
-------------------
[ ], 19[ ]
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
Ladies and Gentlemen:
Pursuant to the provisions of that certain 364-Day Revolving Credit
Agreement dated October 1, 1997, by and between The Energy Network, Inc.
("Borrower") and Fleet National Bank (the "Agreement"), the undersigned, as
borrower, hereby requests an Advance of $[ ] to be made on [ ], 19[ ], which
Advance shall be evidenced by the undersigned's Secured Revolving Credit Note
dated [ ]. The principal balance outstanding under said 364-Day Revolving
Credit Note, after taking into consideration the amount of the Advance requested
hereby, is $[ ].
The undersigned hereby represents and warrants that (i) no event has
occurred and is continuing, or would result from the proposed Advance, which
constitutes an "Event of Default", as that term is defined in the Agreement, or
would constitute such an "Event of Default" but for the requirement that notice
be given or time elapse, or both, and (ii) the representations and warranties in
Article III of the Agreement remain true and correct as of the date hereof,
except those set forth in Section 3.01. The undersigned further represents and
warrants that the financial condition of the undersigned has not materially
adversely changed since the submission of the undersigned's most recent
financial information to Fleet National Bank.
Very truly yours,
THE ENERGY NETWORK, INC.
By:
-------------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT C
---------
[FORM OF COMPLIANCE CERTIFICATE]
------------------------------
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Suresh V. Chivukula, Senior Vice President
Ladies and Gentlemen:
As required by Section 5.04 of that certain 364-Day Revolving Credit
Agreement dated October 1, 1997, by and between The Energy Network, Inc.
("Borrower") and Fleet National Bank, a review of the activities of Borrower for
the fiscal quarter/fiscal year ended [__________] has been made under my
supervision with a view to determining whether Borrower has kept, observed,
performed and fulfilled all of its obligations under the Revolving Credit
Agreement and all other agreements or undertakings contemplated thereby.
The undersigned hereby certifies that the amounts set forth below, with
abbreviated descriptions, to the best of my information and belief, accurately
present amounts required to be calculated by various covenants of the Revolving
Credit Agreement as of the last day of the fiscal quarter/fiscal year noted
above and all terms used herein have the identical meaning as in the Revolving
Credit Agreement.
1. 5.08(B)(I) - TOTAL DEBT TO TANGIBLE NET WORTH
Total Debt _______________
Tangible Net Worth _______________
Ratio of Total Debt to Tangible Net Worth _______________
Maximum Permitted 2.25 to 1
2. 5.08(B)(II) - MINIMUM TANGIBLE NET WORTH
Tangible Net Worth _______________
Minimum Required 30,000,000
<PAGE>
3. 5.08(B)(III) DEBT SERVICE COVERAGE RATIO
EBITDA plus equity purchase funds _______________
Debt Service _______________
Debt Service Coverage Ratio _______________
Minimum Required 1.25 to 1
4. 5.08(B)(IV) INTEREST COVERAGE RATIO
EBIT _______________
Interest expense _______________
Interest Coverage Ratio _______________
Minimum Required 2.5 to 1
5. 7.01(O) CTG'S DEBT TO CAPITALIZATION
CTG total debt ________________
CTG capitalization ________________
CTG ratio of debt to capitalization ________________
Maximum Permitted 70%
6. 7.01(O) S&P RATING OF CTG OPERATING SUBSIDIARIES
Lowest Standard & Poor's debt rating of each
operating subsidiary of CTG ________________
Minimum Required BBB
The undersigned hereby further certifies that he/she has reviewed the terms
of the Revolving Credit Agreement and that, to the best of his/her knowledge, no
event has occurred which constitutes, or which with the passage of time or
service of notice, or both, would constitute, an Event of Default as defined in
the Revolving Credit Agreement.
Sincerely,
THE ENERGY NETWORK, INC.
By:
-------------------------------------
Title:
----------------------------------
-2-
<PAGE>
364-DAY REVOLVING CREDIT NOTE
-----------------------------
$10,000,000.00 October 1, 1997
Hartford, Connecticut
FOR VALUE RECEIVED, THE ENERGY NETWORK, INC., a Connecticut corporation with a
mailing address at P.O. Box 1500, Hartford, Connecticut 06114-1500 ("Borrower"),
hereby promises to pay to FLEET NATIONAL BANK, a national banking association
("Lender"), or to its order, at its office at One Federal Street, Boston,
Massachusetts 02110, the principal sum of up to Ten Million Dollars
($10,000,000.00), or so much thereof as has been advanced and not repaid, in
accordance with the provisions of a 364-Day Revolving Credit Agreement of even
date herewith between the Borrower and Lender (the "Loan Agreement") and which
is then outstanding under this Note, together with interest in arrears on the
unpaid principal balance from time to time outstanding from the date hereof
until the entire principal amount due hereunder is paid in full at the rates
hereinafter provided. Interest shall be calculated on the basis of the actual
number of days elapsed over a year of 360 days. Interest shall be payable
monthly, in arrears, on the first day of each month, or the next business day
thereafter if such day is not a business day, commencing November 1, 1997 and
continuing monthly thereafter until this Note is paid in full.
Advances hereunder shall be made on a revolving basis and as principal is
repaid to Lender, such sums may be re-advanced to the Borrower in accordance
with the provisions of the Loan Agreement, provided no Event of Default has
occurred under the Loan Agreement or hereunder. All capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Loan
Agreement.
This Note is secured, INTER ALIA, by certain "Security Documents" referred
to in the Loan Agreement, and is entitled to the benefits thereof.
INTEREST RATES
BORROWER'S OPTIONS. Subject to the provisions herein with regard to the
Default Rate, interest hereunder shall accrue at the following rates, at
Borrower's selection, subject to the conditions and limitations provided for in
this Note: (i) a rate per annum equal to 60 basis points (.60%) greater than
the LIBO Rate (as hereinafter defined) provided, however, that in the event a
LIBO Rate is unavailable for any reason, interest shall accrue on the Loan at
the Variable Rate (as hereinafter defined) or (ii) a Bank Rate (as hereinafter
defined). Borrower's right to select an interest rate hereunder shall cease
during the continuance of an Event of Default, and, upon the expiration of the
Interest Period(s) for any Advance(s) then in existence, the outstanding
principal balance under this Note shall bear interest at the Variable Rate until
the Event of Default has been cured and Borrower makes an effective interest
rate selection.
SELECTION TO BE MADE. Borrower shall select, and thereafter may change the
selection of, the applicable interest rate, from the alternatives otherwise
provided for
<PAGE>
in this Note, by giving Lender a Notice of Rate Selection: prior to each Loan
Advance, and by the times stated below in the next paragraph.
NOTICE. A "Notice of Rate Selection" shall be a written notice, given by
cable, tested telex, telecopier (with authorized signature), or by telephone if
immediately confirmed by such a written notice, from an Authorized
Representative of Borrower which: (i) is irrevocable; (ii) is received by
Lender not later than 10:00 o'clock A.M. Eastern Time on or before a Business
Day for which the selection of Interest Period is to apply.
IF NO NOTICE. If Borrower fails to select an interest rate option in
accordance with the foregoing prior to a Loan Advance, or prior to the last day
of the applicable Interest Period of an outstanding Advance, any new Loan
Advance made or any Advance for which the Interest Period is expiring and an new
interest rate is not selected by Borrower, shall be deemed to be accruing
interest at the rate based on the LIBO Rate, effective on the date such new Loan
Advance is made or upon the expiration of the existing Interest Period.
MATURITY DATE
So long as no Event of Default (as hereinafter defined) occurs as a result
of which Lender declares this Note immediately due and payable, the unpaid
principal amount due hereunder and any interest then owing shall be payable in
full on September 29, 1998 (the "Maturity Date").
PREPAYMENT
The Loan or any portion thereof may be prepaid in full or in part without
premium or penalty at any time if interest is accruing at the Variable Rate or
on the last day of any Interest Period upon five (5) days' prior written notice
to the holder of this Note. Prepayments at any other time shall be subject to
the payment of a Prepayment Premium. Any partial prepayment of principal shall
first be applied to any installment of principal then due and then be applied to
the principal due in the reverse order of maturity, and no such partial
prepayment shall relieve Borrower of the obligation to pay each subsequent
installment of principal when due.
Borrower shall pay to Lender all reasonable costs and expenses incurred by
Lender in connection with such prepayment and such charges will be paid by
Borrower whether payment is made voluntarily at Borrower's option or
involuntarily after Lender has made demand for payment after an Event of
Default.
In the event that interest is accruing hereunder at the LIBO Rate or a Bank
Rate and Borrower prepays the Loan at any time other than at the end of an
Interest Period, Borrower shall be required to pay a Prepayment Premium (the
"Prepayment Premium") to Lender in an amount computed as follows: the current
Treasury Rate with a maturity date closest to the last day of applicable
Interest Period to which the prepayment is made shall be subtracted from the
cost of funds component of the LIBO Rate in effect at the time of prepayment.
If the result is zero or a
-2-
<PAGE>
negative number, there shall be no Prepayment Premium. If the result is a
positive number, then the resulting percentage shall be multiplied by the amount
of the principal balance being prepaid. The resulting amount shall be divided
by 360 and multiplied by the number of days remaining in the Interest Period as
to which the prepayment is made. Said amount shall be reduced to present value
calculated by using the number of days remaining in the Interest Period and
using the Treasury Rate. The resulting amount shall be the Prepayment Premium
due to Lender upon prepayment of the Loan. If by reason of an event of default
Lender elects to declare this note to be immediately due and payable, then any
Prepayment Premium with respect to this note shall become due and payable in the
same manner as though Borrower had exercised such right of prepayment.
CERTAIN DEFINITIONS AND PROVISIONS RELATING TO INTEREST RATE.
(a) BANKING DAY. The term "Banking Day" means a day on which banks are
not required or authorized by law to close in the city in which Lender's
principal office is situated.
(b) BANK RATE. The term "Bank Rate" means a rate of interest based on, but
not equal to, the Lender's cost of funds as such Bank Rate may be quoted by
Lender to Borrower upon Borrower's request therefor.
(c) BUSINESS DAY; SAME CALENDAR MONTH. The term "Business Day" means any
Banking Day and, if the applicable Business Day relates to the selection or
determination of any LIBO Rate, any London Banking Day. If any day on which a
payment is due is not a Business Day, then the payment shall be due on the next
day following which is a Business Day, unless, with respect to a LIBO Rate, the
effect would be to make the payment due in the next calendar month, in which
event such payment shall be due on the next preceding day which is a Business
Day. Further, if there is no corresponding day for a payment in the given
calendar month (i.e., there is no "February 30th"), the payment shall be due on
the last Business Day of the calendar month.
(d) DOLLARS. The term "Dollars" or "$" means lawful money of the United
States.
(e) INTEREST PERIOD.
(i) The term "Interest Period" means with respect to the LIBO Rate:
a period of three (3) months, subject to availability. Each such Interest
Period shall commence on a Business Day and shall end on the numerically
corresponding day in the third month thereafter. PROVIDED, HOWEVER: (i) if
there is no such numerically corresponding day (I.E., there is no February
30th), such Interest Period shall end on the last Business Day of the
applicable month, (ii) if the last day of such an Interest Period would
otherwise occur on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day; but (iii) if such
extension would otherwise cause such last day to occur in a new calendar
month, then such last day shall occur on the next preceding Business Day.
(ii) The term "Interest Period" shall mean with respect to the
Variable Rate consecutive periods of one (1) day each.
-3-
<PAGE>
(iii) The term "Interest Period" shall mean with respect to a Bank
Rate the maturity of the cost of funds liability on which such Bank Rate is
based.
(iv) No Interest Period may end beyond the Maturity Date. If the
last day of an Interest Period would otherwise occur on a day which is not
a Business Day, such last day shall be extended to the next succeeding
Business Day, except as provided above in clause (i) relative to a LIBO
Rate.
(f) LIBO RATE. The term "LIBO Rate" means, with respect to each LIBO Rate
Interest Period, the rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined on the basis of the offered rates for
deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page 3750 as of 11:00 a.m. London time on
the day that is two London Banking Days preceding the first day of such advance;
provided, however, if the rate described above does not appear on the Telerate
System on any applicable interest determination date, the LIBO Rate shall be the
rate (rounded upwards as described above, if necessary) for deposits in dollars
for a period substantially equal to the interest period on the Reuters Page
"LIBO" (or such other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two (2) London Banking Days prior to the beginning of such interest
period. "Banking Day" shall mean, in respect of any city, any date on which
commercial banks are open for business in that city.
If both the Telerate and Reuters system are unavailable, then the rate for
that date will be determined on the basis of the offered rates for deposits in
U.S. dollars for a period of time comparable to the Interest Period for such
advance which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of the Interest Period for such advance as selected
by the Calculation Agent. The principal London office of each of the four major
London banks will be requested to provide a quotation for its U.S. dollar
deposit offered rate. If at least two such quotations are provided, the rate
for that date will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to the Interest Period for such advance
offered by major banks in New York City at approximately 11:00 a.m. New York
City time, on the day that its two London Banking Days preceding the first day
of the Interest Period for such advance. In the event that Lender is unable to
obtain any such quotation as provided above, it will be deemed that the LIBO
Rate cannot be determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a Reserve Percentage with respect to LIBOR deposits of Lender then
for any period during which such Reserve Percentage shall apply, the LIBO Rate
shall be equal to the amount determined above divided by an amount equal to 1
minus the Reserve Percentage.
(g) MATURITY. The term "Maturity" means the Maturity Date, or in any
instance, upon acceleration of the Loan, if the Loan has been accelerated by
Lender upon an Event of Default.
-4-
<PAGE>
(h) PRESENT VALUE. The term "Present Value" means the value at the
applicable maturity discounted to the date of prepayment using the Treasury
Rate.
(i) PRIME RATE. The term "Prime Rate" means the per annum rate of
interest so designated from time to time by Lender as its prime rate. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer.
(j) TREASURY RATE. The term "Treasury Rate" means, as of the date of any
calculation or determination, the latest published rate for United States
Treasury Notes or Bills (but the rate on Bills issued on a discounted basis
shall be converted to a bond equivalent) as published weekly in the Federal
Reserve Statistical Release H.15(519) of Selected Interest Rates in an amount
which approximates (as determined by Lender) the amount (i) approximately
comparable to the portion of the Loan to which the Treasury Rate applies for the
Interest Period, or (ii) in the case of a prepayment, the amount prepaid and
with a maturity closest to the original maturity of the installment which is
prepaid in whole or in part.
(k) VARIABLE RATE. The term "Variable Rate" means a per annum rate equal
at all times to the Prime Rate, with changes therein to be effective
simultaneously with any change in the Prime Rate.
ADDITIONAL PROVISIONS RELATED TO INTEREST RATE SELECTION.
(a) INCREASED COSTS. If, due to any one or more of: (i) the introduction
of any applicable law or regulation or any change (other than any change by way
of imposition or increase of reserve requirements already referred to in the
definition of LIBO Rate) in the interpretation or application by any authority
charged with the interpretation or application thereof of any law or regulation;
or (ii) the compliance with any guideline or request from any governmental
central bank or other governmental authority (whether or not having the force of
law), there shall be an increase in the cost to Lender of agreeing to make or
making, funding or maintaining LIBO Rate Loans, including without limitation
changes which affect or would affect the amount of capital or reserves required
or expected to be maintained by Lender, with respect to all or any portion of
the Loan, or any corporation controlling Lender, on account thereof, then
Borrower from time to time shall, upon written demand by Lender, pay Lender
additional amounts sufficient to indemnify Lender against any increased cost
actually incurred. A certificate as to the amount of the increased cost and the
reason therefor submitted to Borrower by Lender, in the absence of manifest
error, shall be conclusive and binding for all purposes.
(b) ILLEGALITY. Notwithstanding any other provision of this Note, if the
introduction of or change in or in the interpretation of any law, treaty,
statute, regulation or interpretation thereof shall make it unlawful, or any
central bank or government authority shall assert by directive, guideline or
otherwise, that it is unlawful, for Lender to make or maintain a LIBO Rate or
to continue to fund or maintain a LIBO Rate then, on written notice thereof and
demand by Lender to Borrower, (a) the obligation of Lender to make a LIBO Rate
available and to convert or continue any Loan advances at a LIBO Rate shall
terminate and (b) Borrower shall convert the interest rate to a Variable Rate.
-5-
<PAGE>
(c) ADDITIONAL LIBO RATE CONDITIONS. The selection by Borrower of a LIBO
Rate and the maintenance of advances at such rate shall be subject to the
following additional terms and conditions:
(i) AVAILABILITY. If, before or after Borrower has selected to
take or maintain a LIBO Rate, Lender notifies Borrower that:
(A) dollar deposits in the amount and for the maturity
requested are not available to Lender in the London interbank market
at the rate specified in the definition of LIBO Rate set forth above,
or
(B) reasonable means do not exist for Lender to determine
the LIBO Rate for the amounts and maturity requested,
then the principal which would have been advanced at a LIBO Rate shall be
advanced at a Variable Rate.
(ii) PAYMENTS NET OF TAXES. All payments and prepayments of
principal and interest under this Note shall be made net of any taxes and
costs resulting from having principal outstanding at or computed with
reference to a LIBO Rate. Without limiting the generality of the preceding
obligation, illustrations of such taxes and costs are taxes, or the
withholding of amounts for taxes, of any nature whatsoever including
income, excise, interest equalization taxes (other than United States or
state income taxes) as well as all levies, imposts, duties or fees whether
now in existence or as the result of a change in or promulgation of any
treaty, statute, regulation, or interpretation thereof or any directive
guideline or otherwise by a central bank or fiscal authority (whether or
not having the force of law) or a change in the basis of, or the time of
payment of, such taxes and other amounts resulting therefrom.
DEFAULT
Upon the occurrence of any of the following (each of which events shall be
an Event of Default hereunder):
(i) the failure of Borrower to make any payment of principal or
interest hereunder within ten (10) days after the same is due, or
(ii) an Event of Default as described and defined in any of the Loan
Agreement, the Security Instruments or any instrument evidencing any
indebtedness of Borrower to Lender and the expiration of any period
provided in such instrument to cure such default,
then Lender may declare the entire unpaid principal balance hereunder
immediately due and payable without notice, demand or presentment and may
exercise any of its rights under the Security Instruments. In the event that
Lender or any subsequent holder of this Note shall
-6-
<PAGE>
exercise or endeavor to exercise any of its remedies hereunder or under the
Security Instruments, Borrower shall pay on demand all reasonable costs and
expenses incurred in connection therewith, including, without limitation,
reasonable attorney's fees and Lender may take judgment for all such amounts in
addition to all other sums due hereunder.
LATE PAYMENT FEE
Irrespective of the exercise or nonexercise of any of the aforesaid rights,
if any monthly payment of principal or interest hereunder is not paid in full
within ten (10) days after the same is due, Borrower shall pay to Lender a
processing fee on such unpaid amount equal to five percent (5%) of such late
payment.
DEFAULT RATE OF INTEREST
Irrespective of the exercise or nonexercise of any of the aforesaid rights,
if any Event of occurs Lender has accelerated amounts owing under the Note
following the occurrence of Event of Default hereunder, from and after the date
of such acceleration interest charges hereunder shall be increased to the lesser
of (i) the then applicable interest rate charges plus four percent (4%) or (ii)
the maximum rate then permitted by law, until Lender is satisfied that the Event
of Default has been cured.
MISCELLANEOUS
In the event that the holder of this Note shall exercise or endeavor to
exercise any of its remedies hereunder or under said Loan Agreement or any
agreements securing this Note, Borrower shall pay all reasonable costs and
expenses incurred in connection therewith, including without limitation,
reasonable attorneys' fees, and the holder hereof may take judgment for all such
amounts in addition to all other sums due hereunder.
Borrower hereby waives presentment, dishonor, protest and demand,
diligence, notice of protest, demand and of dishonor, and any other notice
otherwise required to be given under the law in connection with the delivery,
acceptance, performance, default, enforcement or collection of this Note, and
expressly agrees that this Note or any payment hereunder may be extended or
subordinated, by forbearance or otherwise, from time to time, without in any way
affecting the liability of Borrower. No consent or waiver by the holder hereof
with respect to any action or failure to act which, without such consent or
waiver, would constitute a breach of any provision of this Note, shall be valid
and binding unless in writing and signed by both Borrower and the holder hereof.
All agreements between Borrower and Lender are hereby expressly limited so
that in no contingency or event whatsoever whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise shall the amount paid
or agreed to be paid to Lender for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof, provided, however, that in the event there is a
-7-
<PAGE>
change in the law which results in a higher permissible rate of interest, then
this Note shall be governed by such new law as of its effective date. If, from
any circumstance whatsoever, fulfillment of any provision hereof or of the Loan
Agreement or of any agreements securing this Note at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between Borrower and Lender.
Borrower expressly agrees that this Note, or any payment hereunder, may be
extended from time to time, without in any way affecting the liability of
Borrower. No unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in writing and signed
by Lender.
This Note shall be construed in accordance with and governed by the laws of
the State of Connecticut, except to the extent that such laws are superseded by
Federal enactments.
WAIVER OF PREJUDGMENT RIGHTS AND JURY TRIAL
BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS
A COMMERCIAL TRANSACTION, AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES AS
THE SAME ARE OR IN THE FUTURE MAY BE AMENDED OR AS OTHERWISE ALLOWED BY ANY
STATE OR FEDERAL LAW OR THE CONSTITUTION OF CONNECTICUT OR THE UNITED STATES
WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO USE.
BORROWER HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON
OR WITH RESPECT TO THIS NOTE, THE LOAN AGREEMENT, THE SECURITY INSTRUMENTS OR
ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH. NEITHER
BORROWER NOR ANY ASSIGNEE OF OR SUCCESSOR TO THE BORROWER, SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR
PROCEEDING BASED UPON, OR ARISING OUT OF, THIS NOTE, THE LOAN AGREEMENT, THE
SECURITY INSTRUMENTS OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, OR ANY OF THEM. NO PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
-8-
<PAGE>
PROVISIONS OF THIS WAIVER OF RIGHT TO JURY TRIAL HAVE BEEN DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS WAIVER OF RIGHT TO JURY TRIAL WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first above written.
WITNESS: THE ENERGY NETWORK, INC.
By:
- ----------------------------------- -------------------------------------
Name:
Title:
-9-
<PAGE>
GUARANTY
This unconditional guaranty ("Guaranty") is given pursuant to the terms and
conditions of the (a) a certain 364-Day Credit Agreement and (b) a certain
3-Year Revolving Credit Agreement, each between THE ENERGY NETWORK, INC., a
Connecticut corporation with a mailing address at P.O. Box 1500, Hartford,
Connecticut 06114-1500 (the "Borrower") and FLEET NATIONAL BANK, a national
banking association with an office at One Federal Street, Boston, Massachusetts
02110 (the "Lender") of even date herewith (collectively, the "Loan Agreement")
executed in connection with (i) a certain 364-Day Revolving Credit Note and (ii)
a certain 3-Year Revolving Credit Note, each given by the Borrower to the order
of Lender of even date herewith and each in the original principal amounts of
$10,000,000 (collectively, the "Note"). Capitalized terms used herein which are
not otherwise specifically defined shall have the same meaning herein as in the
Loan Agreement.
FOR VALUE RECEIVED, and to induce Lender to extend credit to Borrower as
provided for in the Loan Agreement and the other Loan Documents. TEN
TRANSMISSION COMPANY, a Connecticut corporation, THE HARTFORD STEAM COMPANY, a
Connecticut corporation, ENSERVE, INCORPORATED, a Connecticut corporation and
ENI GAS SERVICES, INC., a Connecticut corporation, each having a mailing address
at P.O. Box 1500, Hartford, Connecticut 06114-1500, hereinafter called jointly,
severally and collectively "Guarantor", hereby unconditionally agree as follows:
1. GUARANTY. Guarantor, as a primary party and not merely as a surety,
unconditionally and irrevocably guarantees the following "Guaranteed
Obligations":
A. ALL OBLIGATIONS. The prompt and full payment (and not merely the
collectibility) performance and observance of all of the obligations, terms and
conditions to be paid, performed or observed by Borrower under the Loan
Agreement and each other Loan Document, each as the same may be hereafter
amended, modified, extended, renewed or recast, including, but not limited to
the payment of $20,000,000 together with interest and other charges thereon as
provided for in the Note and the Loan Agreement.
B. PAYMENT. The prompt and full payment, and not merely the
collectibility, of all principal, interest, fees and other charges when due
under the Note, the Loan Agreement, and each other Loan Document.
Upon any Event of Default under the Loan Agreement, or any of the
other Loan Documents, or if Lender has accelerated the Loan pursuant to a right
to do so under the Loan Agreement, Lender may at its option proceed directly and
at once, without further notice, against Guarantor hereunder, without proceeding
against Borrower, or any other person or other Collateral for the obligations
secured by this Guaranty. Any sums payable by Guarantor hereunder shall bear
interest at the Default Rate from the date of demand until the date paid.
If Borrower, or Guarantor if so required, shall fail or refuse to
perform or continue performance of all of the Obligations of the Loan Agreement
on the part of Borrower to be kept and performed, then, if an Event of Default
exists on account thereof under the Loan Agreement or this Guaranty, in addition
to any other rights and remedies which Lender may have hereunder or elsewhere,
and not in limitation thereof, Lender, at Lender's option, may exercise any or
all of
<PAGE>
its rights and remedies under the Loan Agreement and each other Loan Document.
The amounts of any and all expenditures so made by Lender for completion of the
Improvements shall be immediately due and payable to Lender by Guarantor
together with interest thereon at the Default Rate from the date of demand until
the date paid.
This Guaranty shall survive and continue in full force and effect
beyond and after the payment and satisfaction of the Guaranteed Obligations and
the Obligations of Borrower in the event Lender is required to disgorge or
return any payment or property received as a result of any laws pertaining to
preferences, fraudulent transfers or fraudulent conveyances.
2. WAIVERS. Guarantor hereby waives and relinquishes to the fullest
extent now or hereafter not prohibited by applicable law:
(i) all suretyship defenses and defenses in the nature thereof;
(ii) any right or claim of right to cause a marshalling of the
assets of Borrower or of any Collateral, or to cause Lender to proceed
against any of the other security for the Guaranteed Obligations or the
Obligations of Borrower before proceeding under this Agreement against
Guarantor, or, if there shall be more than one Guarantor, to require Lender
to proceed against any other Guarantor or any of Guarantors in any
particular order;
(iii) until the full and Non-Contestable Payment (as defined in
Section 16.1 below) and satisfaction of all Obligations all rights and
remedies, including, but not limited to, any rights of subrogation,
contribution, reimbursement, exoneration or indemnification pursuant to any
agreement, express or implied, or now or hereafter accorded by applicable
law to indemnitors, guarantors, sureties or accommodation parties.
PROVIDED, HOWEVER, unless Lender otherwise expressly agrees in writing,
such waiver by any particular Guarantor shall not be effective to the
extent that by virtue thereof such Guarantor's liability under this
Guaranty or under any other Loan Document is rendered invalid, voidable, or
unenforceable under any applicable state or federal law dealing with the
recovery or avoidance of so-called preferences or fraudulent transfers or
conveyances or otherwise;
(iv) notice of the acceptance hereof, presentment, demand for
payment, protest, notice of protest, or any and all notice of nonpayment,
nonperformance, nonobservance or default, or other proof or notice of
demand whereby to charge Guarantor therefor;
(v) the pleading of any Statute of Limitations as a defense to
Guarantor's obligations hereunder; and
(vi) the right to a trial by jury in any matter related to this
Guaranty.
3. CUMULATIVE RIGHTS. Lender's rights under this Agreement shall be in
addition to and not in limitation of all of the rights and remedies of Lender
under the Loan Documents. All
-2-
<PAGE>
rights and remedies of Lender shall be cumulative and may be exercised in such
manner and combination as Lender may determine.
4. NO IMPAIRMENT. The liability of Guarantor hereunder shall in no way
be limited or impaired by, and Guarantor hereby assents to and agrees to be
bound by, any amendment or modification of the provisions of the Loan Documents
to or with Lender by Borrower or any other Guarantor. In addition, the
liability of Guarantor under this Guaranty and the other Loan Documents shall in
no way be limited or impaired by:
(i) any extensions of time for performance required by any of the
Loan Documents;
(ii) any amendment to or modification of any of the Loan Documents;
(iii) the accuracy or inaccuracy of any of the representations or
warranties made by or on behalf of Borrower or Guarantor, under any Loan
Document or otherwise;
(iv) the release of Borrower or any other person or entity, from
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act, or otherwise;
(v) the filing of any bankruptcy or reorganization proceeding by or
against Borrower;
(vi) the release or substitution in whole or part of any collateral
or security for the Obligations or the Guaranteed Obligations;
(vii) the release of any other party now or hereafter liable upon or
in respect of this Guaranty or any of the other Loan Documents; or
(viii) the invalidity or unenforceability of all or any portion of any
of the Loan Documents as to Borrower or any other person or entity.
Any of the foregoing may be accomplished with or without notice to Borrower or
any Guarantor and with or without consideration.
5. DELAY NOT WAIVER. No delay on Lender's part in exercising any right,
power or privilege hereunder or under any of the Loan Documents shall operate as
a waiver of any such privilege, power or right. No waiver by Lender in any
instance shall constitute a waiver in any other instance.
6. WARRANTIES AND REPRESENTATIONS. Guarantor warrants and represents to
Lender for the express purpose of inducing Lender to enter into the Loan
Agreement, to make each Loan Advance, to accept this Guaranty, and to otherwise
complete the transactions contemplated by the Loan Agreement that as of the date
of this Guaranty, upon the date of each Loan Advance and at all times thereafter
until the Loan is repaid and all Guaranteed Obligations to Lender have been
satisfied in full, as follows:
-3-
<PAGE>
(i) NO VIOLATION. The payment and performance by Guarantor of
Guarantor's obligations under the this Guaranty do not and shall not
constitute a violation of any law, order, regulation, contract or agreement
to which Guarantor is a party or by which Guarantor or Guarantor's property
may be bound;
(ii) NO LITIGATION. There is no material litigation now pending or,
to the best of Guarantor's knowledge threatened in writing, against
Guarantor which, if adversely decided would materially impair the ability
of Guarantor to pay and perform Guarantor's obligations under this
Guaranty. There is no litigation (whether or not material) pending, or
threatened in writing, against Guarantor in which the amount in controversy
exceeds One Million Dollars ($1,000,000) which is not either: (i) covered
by adequate insurance, or (ii) previously disclosed in writing to Lender
together with a written explanation of why such litigation is not material.
(iii) ENTITY MATTERS. Each Guarantor is a duly organized, validly
existing corporation organized and in good standing under the laws of
_______________, and duly qualified to do business and in good standing
under the laws of the State of Connecticut, has all requisite power and
authority to conduct its business and to own its property as now conducted
or owned, and is qualified to do business in all jurisdictions where the
nature and extent of its business is such that such qualification is
required by law.
(iv) VALID AND BINDING. Each of the Loan Documents to which
Guarantor is a party, constitutes such Guarantor's legal, valid and binding
obligation in accordance with the respective terms thereof, subject to
bankruptcy, insolvency and similar laws of general application affecting
the rights and remedies of creditors and with respect to the availability
of remedies of specific enforcement subject to the discretion of the court
before which proceedings therefor may be brought.
(v) SOLVENCY. Guarantor is solvent and is not rendered insolvent
by the obligations undertaken in this Guaranty. No Guarantor is
contemplating either the filing of a petition or proceeding under any state
or federal bankruptcy or insolvency or reorganization laws or the
liquidating of all or a major portion of such Guarantor's property except
as has been previously disclosed to Lender, and no Guarantor has any
knowledge of any such petition or proceeding being filed against such
Guarantor.
(vi) MATERIAL ECONOMIC BENEFIT. The granting of the Loan to
Borrower will constitute a material economic benefit to each Guarantor
inasmuch as Borrower is the corporate parent of each Guarantor.
7. NOTICES. All notices shall be given in the manner provided for, and
shall be effective in accordance with the provisions of, Section 8.07 of the
Loan Agreement.
8. NO ORAL CHANGE. No provision of this Agreement may be changed,
waived, discharged, or terminated orally (in person or by telephone) or by any
other means except by an instrument in
-4-
<PAGE>
writing signed by the party against whom enforcement of the change, waiver or
discharge or termination is sought.
9. PARTIES BOUND; BENEFIT. This Agreement shall be binding upon
Guarantor and Guarantor's respective successors, assigns, heirs and personal
representatives and shall be for the benefit of Lender, and of any subsequent
holder of Lender's interest in the Loan and of any owner of a participation
interest therein. In the event the interest of Lender under the Loan Documents
is sold or transferred, then the liability of the Guarantor to Lender shall then
be in favor of both Lender originally named herein and each subsequent holder of
Lender's interest therein, to the extent of their respective interests.
10. JOINT AND SEVERAL. If there is more than one (1) Guarantor, the
obligations of each Guarantor and such Guarantor's respective successors,
assigns, heirs and personal representatives shall be and remain joint and
several. Each reference to Guarantor shall include each Guarantor separately as
well as all Guarantors collectively.
11. PARTIAL INVALIDITY. Each of the provisions hereof shall be
enforceable against Guarantor to the fullest extent now or hereafter not
prohibited by applicable law. The invalidity or unenforceability of any
provision hereof shall not limit the validity or enforceability of each other
provision hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall in all respects be governed by and construed and
enforced in accordance with the internal laws of the State of Connecticut,
without giving effect to principles of conflicts of law.
13. CONSENT TO JURISDICTION. Guarantor hereby irrevocably submits to the
nonexclusive personal jurisdiction of any Connecticut State Court or any Federal
Court sitting in Connecticut over any suit, action or proceeding arising out of
or relating to this Guaranty. Guarantor hereby agrees and consents that in
addition to any methods of service of process provided for under applicable law,
all service of process in any such suit, action or proceeding in any Connecticut
State or Federal Court sitting in Connecticut may be made by certified or
registered mail, return receipt requested, directed to Guarantor at the address
indicated in Section 7 above and service so made shall be deemed completed five
(5) days after the same shall have been so mailed.
14. Intentionally omitted.
15. ADDITIONAL COVENANTS OF THE GUARANTORS.
15.1. GENERAL. Guarantor shall pay, perform, observe and comply with
all of the obligations, terms, covenants and conditions set forth in this
Guaranty and the other Loan Documents to which Guarantor is a party and by any
provisions of the Loan Agreement specifically applicable to Guarantor,
including, but not limited to the provisions requiring the Borrower to deliver
financial statements on a consolidated and consolidating basis.
15.2. PROHIBITED TRANSFERS. Without Lender's prior written consent
after full disclosure, Guarantor shall not transfer any material portion of
Guarantor's property, real or
-5-
<PAGE>
personal, or release any contract right or claim which constitutes a material
portion of Guarantor's net worth, either voluntarily or involuntarily,
absolutely or collaterally, without receiving full fair market value therefor.
Guarantor agrees that any transfer or release in violation of the foregoing
provision shall be deemed to have occurred with an intent to defraud creditors.
For purposes of the foregoing, the term "material" shall be defined as any
transfer or release involving more than ten percent (10%) of Guarantor's net
worth in any calendar year.
16. SUBORDINATION.
16.1. Any indebtedness of Borrower to Guarantor, or to any affiliated
entity, now or hereafter existing together with any interest thereon shall be,
and such indebtedness is, hereby deferred, postponed and subordinated to the
prior, full and Non-Contestable Payment and satisfaction of all Obligations of
Borrower to the Lender. Payment and satisfaction of Obligations shall be deemed
"Non-Contestable Payment" only upon such payment and satisfaction and the
expiration of all periods of time within which a claim for the recovery of a
preferential payment, or fraudulent conveyance, or fraudulent transfer, in
respect of payments received by Lender as to the Obligations could be filed or
asserted with: (A) no such claim having been filed or asserted, or (B) if so
filed or asserted, the final, non-appealable decision of a court of competent
jurisdiction denying the claim or assertion.
16.2. At all times until the full and Non-Contestable Payment and
satisfaction of the Obligations of Borrower to Lender with respect to the Loan
(and including interest accruing on the Note after the commencement of a case by
or against Borrower under the Bankruptcy Code now or hereafter in effect, which
interest the parties agree shall remain a claim that is prior and superior to
any claim of Guarantor or any affiliated entity notwithstanding any contrary
practice, custom or ruling in cases under the Bankruptcy Code, as now or
hereafter in effect, generally), Guarantor, and each affiliated entity, agrees
not to accept any payment or satisfaction for any kind of indebtedness of
Borrower to Guarantor, or any affiliated entity, and hereby assigns such
indebtedness to Lender including, but not limited to, the right to file proofs
of claim and to vote thereon in connection with any such case under the
Bankruptcy Code, as now or hereafter in effect, and the right to vote on any
plan of reorganization.
16.3. In addition to the foregoing, and not in limitation thereof,
any claims of Guarantor, or any affiliated entity, of subrogation, contribution,
reimbursement, exoneration, indemnification, or reimbursement arising out of any
payment made on this Guaranty, whether such claim is based upon an express or
implied contract, or operation of law, are hereby waived until the full and
Non-Contestable Payment and satisfaction of all Obligations of Borrower to
Lender.
17. LEGAL FEES, COSTS AND EXPENSES. Each Guarantor further agrees to pay
upon demand all costs and expenses reasonably incurred by Lender or its
successors or assigns in connection with enforcing any of the rights or remedies
of Lender, or such successors or assigns, under or with respect to this Guaranty
including, but not limited to, attorneys' fees and the out-of-pocket expenses
and disbursements of such attorneys. Any such amounts which are not paid within
ten
-6-
<PAGE>
(10) days of demand therefor shall bear interest at the Default Rate from the
date of demand until paid.
18. SET-OFF. Guarantor hereby grants to Lender, a lien, security interest
and right of set-off as security for all liabilities and obligations to Lender,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time, without
demand or notice, Lender may set-off the same or any part thereof and apply the
same to any liability or obligation of Borrower and Guarantor even though
unmatured and regardless of the adequacy of any other collateral securing the
Loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE BORROWER OR GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
19. JURY TRIAL WAIVER. GUARANTOR AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND MAKE THE LOAN.
NEXT PAGE IS SIGNATURE PAGE
-7-
<PAGE>
Witness the execution and delivery hereof as an instrument under seal as of
the 1st day of October, 1997.
GUARANTORS:
ENSERVE, INCORPORATED
By:
- ----------------------------------- -------------------------------------
Witness Name:
--------------------------------
Title:
-------------------------------
ENI GAS SERVICES, INC.,
By:
- ----------------------------------- -------------------------------------
Witness Name:
--------------------------------
Title:
-------------------------------
-8-
<PAGE>
Exhibit 99(b)(4)
EXECUTION COPY
10/1/97
BII/88663_4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE ENERGY NETWORK, INC.
$45,000,000
6.99% Senior Secured Notes due 2009
---------------
NOTE PURCHASE AGREEMENT
---------------
Dated as of October 1, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. AUTHORIZATION OF NOTES.................................................. 1
2. SALE AND PURCHASE OF NOTES.............................................. 1
3. CLOSING................................................................. 2
4. CONDITIONS TO CLOSING................................................... 2
4.1. Representations and Warranties................................... 2
4.2. Performance; No Default.......................................... 2
4.3. Compliance Certificates.......................................... 3
4.4. Opinions of Counsel.............................................. 3
4.5. Purchase Permitted By Applicable Law, etc........................ 3
4.6. Sale of Other Notes.............................................. 3
4.7. Payment of Special Counsel Fees.................................. 4
4.8. Private Placement Number......................................... 4
4.9. Changes in Corporate Structure................................... 4
4.10. Credit Rating.................................................... 4
4.11. Subsidiary Guarantees............................................ 4
4.12. Pledge Agreement; Collateral Agency Agreement.................... 4
4.13. Consent.......................................................... 5
4.14. Credit Agreement................................................. 5
4.15. Forward Equity Purchase Agreement................................ 5
4.16. Support Agreement................................................ 5
4.17. Tender Offer..................................................... 5
4.18. Proceedings and Documents........................................ 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 5
5.1. Organization; Power and Authority................................ 5
5.2. Authorization, etc............................................... 6
5.3. Disclosure....................................................... 6
5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates....................................................... 7
5.5. Financial Statements............................................. 7
5.6. Compliance with Laws, Other Instruments, etc..................... 8
5.7. Governmental Authorizations, etc................................. 8
5.8. Litigation; Observance of Agreements, Statutes and Orders........ 8
i
<PAGE>
5.9. Taxes............................................................ 8
5.10. Title to Property; Leases; Pledge Agreement...................... 9
5.11. Licenses, Permits, etc........................................... 9
5.12. Compliance with ERISA............................................ 10
5.13. Private Offering by the Company.................................. 11
5.14. Use of Proceeds; Margin Regulations.............................. 11
5.15. Existing Indebtedness; Future Liens.............................. 11
5.16. Foreign Assets Control Regulations, etc.......................... 12
5.17. Status under Certain Statutes.................................... 12
5.18. Environmental Matters............................................ 12
5.19. Representations in Transaction Documents......................... 13
6. REPRESENTATIONS OF THE PURCHASER........................................ 13
6.1. Purchase for Investment.......................................... 13
6.2. Source of Funds.................................................. 13
7. INFORMATION AS TO COMPANY............................................... 14
7.1. Financial and Business Information............................... 14
7.2. Officer's Certificate............................................ 17
7.3. Inspection....................................................... 18
8. INTEREST ON THE NOTES; PREPAYMENT OF THE NOTES.......................... 18
8.1. Interest on the Notes............................................ 18
8.2. Required Prepayments............................................. 18
8.3. Optional Prepayments with Make-Whole Amount...................... 19
8.4. Prepayment in Connection with a Change of Control................ 19
8.5. Notices, Etc; Calculation of Make-Whole Amounts.................. 20
8.6. Allocation of Partial Prepayments................................ 20
8.7. Maturity; Surrender, etc......................................... 20
8.8. Purchase of Notes................................................ 21
8.9. Make-Whole Amount................................................ 21
9. AFFIRMATIVE COVENANTS................................................... 22
9.1. Compliance with Law.............................................. 22
9.2. Insurance........................................................ 23
9.3. Maintenance of Properties........................................ 23
9.4. Payment of Taxes and Claims...................................... 23
9.5. Corporate Existence, etc......................................... 23
9.6. Subsidiary Guarantees, etc....................................... 24
ii
<PAGE>
10. NEGATIVE COVENANTS...................................................... 24
10.1. Transactions with Affiliates..................................... 24
10.2. Merger, Consolidation, etc....................................... 24
10.3. Consolidated Net Worth........................................... 25
10.4. Debt Service Coverage Ratio...................................... 25
10.5. Indebtedness..................................................... 25
10.6. Intercompany Indebtedness........................................ 26
10.7. Liens............................................................ 26
10.8. Sale and Leasebacks.............................................. 27
10.9. Restricted Payments.............................................. 27
10.10. Amendments, etc. to Forward Equity Purchase Agreement........... 27
11. EVENTS OF DEFAULT....................................................... 28
12. REMEDIES ON DEFAULT, ETC................................................ 31
12.1. Acceleration..................................................... 31
12.2. Other Remedies................................................... 31
12.3. Rescission....................................................... 32
12.4. No Waivers or Election of Remedies, Expenses, etc................ 32
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................... 32
13.1. Registration of Notes............................................ 32
13.2. Transfer and Exchange of Notes................................... 33
13.3. Replacement of Notes............................................. 33
14. PAYMENTS ON NOTES....................................................... 34
14.1. Place of Payment................................................. 34
14.2. Home Office Payment.............................................. 34
15. EXPENSES, ETC........................................................... 34
15.1. Transaction Expenses............................................. 34
15.2. Survival......................................................... 35
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............ 35
17. AMENDMENT AND WAIVER.................................................... 35
17.1. Requirements..................................................... 35
17.2. Solicitation of Holders of Notes................................. 36
17.3. Binding Effect, etc.............................................. 36
iii
<PAGE>
17.4. Notes held by Company, etc....................................... 36
18. NOTICES................................................................. 37
19. REPRODUCTION OF DOCUMENTS............................................... 37
20. CONFIDENTIAL INFORMATION................................................ 37
21. SUBSTITUTION OF PURCHASER............................................... 38
22. MISCELLANEOUS........................................................... 39
22.1. Successors and Assigns........................................... 39
22.2. Payments Due on Non-Business Days................................ 39
22.3. Severability..................................................... 39
22.4. Construction..................................................... 39
22.5. Counterparts..................................................... 39
22.6. Governing Law.................................................... 40
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and
Ownership of Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.15 -- Existing Indebtedness/Liens
EXHIBIT 1 -- Form of 6.99% Senior Secured Note due 2009
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the
Company
iv
<PAGE>
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel
for the Purchasers
EXHIBIT A -- Form of Subordination Provisions
EXHIBIT B -- Form of Collateral Agency Agreement
EXHIBIT C -- Form of Consent
EXHIBIT D -- Form of Pledge Agreement
EXHIBIT E -- Form of Subsidiary Guarantee
V
<PAGE>
THE ENERGY NETWORK, INC.
100 Columbus Blvd.
Hartford, Connecticut 06144
6.99% Senior Secured Notes due 2009
As of October 1, 1997
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
THE ENERGY NETWORK, INC., a Connecticut corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $45,000,000 aggregate
principal amount of its 6.99% Senior Secured Notes due 2009 (the "NOTES", such
term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined)).
The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other purchasers
named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such
Closing to each of the Other Purchasers of Notes in the principal amount
specified opposite its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other
<PAGE>
Agreement and no liability to any Person for the performance or non-performance
by any Other Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Milbank, Tweed, Hadley & McCloy,
One Chase Manhattan Plaza, New York, New York 10005, at 10:00 a.m., New York
City time, at a closing (the "CLOSING") on October 30, 1997 or on such other
Business Day thereafter on or prior to November 15, 1997 as may be agreed upon
by the Company and you and the Other Purchasers. At the Closing the Company
will deliver to you the Notes to be purchased by you in the form of a single
Note (or such greater number of Notes in denominations of at least $100,000 as
you may request) dated the date of the Closing and registered in your name (or
in the name of your nominee), against delivery by you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to an account of the Company designated in a written notice from the
Company to you at least two Business Days in advance of the Closing. If at the
Closing the Company shall fail to tender such Notes to you as provided above in
this Section 3, or any of the conditions specified in Section 4 shall not have
been fulfilled to your satisfaction, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
you may have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
and the other Transaction Documents to which the Company is a party shall be
correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement and in each other Transaction Document to
which the Company is a party required to be performed or complied with by it
prior to or at the Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by Section
5.14) no Default or Event of Default shall have occurred and be continuing.
Neither the Company nor any Subsidiary shall have entered into any transaction
2
<PAGE>
since the date of the Memorandum that would have been prohibited by Section 10.1
hereof had such Section applied since such date.
4.3. COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. Each of the Company, CTG and each
Subsidiary shall have delivered to you a certificate certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Transaction Documents to which it
is a party.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (A) from Murtha, Cullina, Richter and Pinney,
counsel for the Company, CTG and each Subsidiary, covering the matters set forth
in Exhibit 4.4(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and
(B) from Milbank, Tweed, Hadley & McCloy, your special counsel in connection
with such transactions, covering the matters set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (I) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (II) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (III) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
3
<PAGE>
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
Neither CTG nor the Company shall have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 5.5.
4.10. CREDIT RATING.
You shall have received evidence, in a form satisfactory to you, that
Standard & Poor's and Moody's have assigned ratings of not less than A- and A3,
respectively, to the senior unsecured long-term debt of CNG.
4.11. SUBSIDIARY GUARANTEES.
Each Subsidiary of the Company shall have executed and delivered a
Subsidiary Guarantee and each such Subsidiary Guarantee shall be in full force
and effect.
4.12. PLEDGE AGREEMENT; COLLATERAL AGENCY AGREEMENT.
The Company and the Collateral Agent shall have executed and delivered
the Pledge Agreement and the Pledge Agreement shall be in full force and effect.
The stock certificates identified in Annex 1 thereto, together with undated
stock powers executed in blank in connection therewith, shall have been
delivered to the Collateral Agent. All necessary and appropriate filings shall
have been made in all necessary and appropriate public offices and all other
necessary and appropriate actions shall have been taken so that the Liens
created by the Pledge Agreement constitute perfected first priority Liens on all
right, title and interest of the Company in the Collateral.
The Collateral Agency Agreement shall have been executed and delivered
by the parties thereto and shall be in full force and effect.
4
<PAGE>
4.13. CONSENT.
CTG, the Company and the Collateral Agent shall have executed and
delivered the Consent and the Consent shall be in full force and effect.
4.14. CREDIT AGREEMENT.
The Company and the Bank shall have executed and delivered the Credit
Agreement and the Credit Agreement shall be in full force and effect.
4.15. FORWARD EQUITY PURCHASE AGREEMENT.
The Company and CTG shall have executed and delivered the Forward
Equity Purchase Agreement and the Forward Equity Purchase Agreement shall be in
full force and effect.
4.16. SUPPORT AGREEMENT.
CTG shall have executed and delivered the Support Agreement and the
Support Agreement shall be in full force and effect.
4.17. TENDER OFFER.
The Company shall have committed to purchase not less than 1,800,000
shares of CTG's common stock pursuant to the Tender Offer or as otherwise
contemplated by the Forward Equity Purchase Agreement.
4.18. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and the other Transaction Documents
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required
5
<PAGE>
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement, the Notes and the
other Transaction Documents to which the Company is a party and to perform the
provisions hereof and thereof. The Company is a wholly-owned Subsidiary of CTG.
5.2. AUTHORIZATION, ETC.
This Agreement, the Notes and the other Transaction Documents to which
the Company is a party have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note and each other Transaction Document to
which the Company is a party will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (I) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (II) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company, through its agent, PaineWebber Incorporated, has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum, dated September 1997, (the "MEMORANDUM"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
September 30, 1996, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
6
<PAGE>
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (I) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary and (II) of
the Company's Affiliates, other than Subsidiaries.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
other than the Lien of the Pledge Agreement.
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the financial
statements listed on Schedule 5.5. All of said financial statements (including
in each case the related schedules and notes) fairly present in all material
respects the consolidated financial position of the Persons indicated therein as
of the respective dates specified in such Schedule and the consolidated results
of their operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
7
<PAGE>
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Notes and the other Transaction Documents to which the Company is
a party will not (I) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under (other than the Lien of the Pledge
Agreement), any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (II) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (III) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement, the Notes
or any other Transaction Document to which the Company is a party, except for
filings in respect of the Liens created pursuant to the Pledge Agreement.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before
8
<PAGE>
they have become delinquent, except for any taxes and assessments (I) the amount
of which is not individually or in the aggregate Material or (II) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been determined
by the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended September 30, 1996.
5.10. TITLE TO PROPERTY; LEASES; PLEDGE AGREEMENT.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
The provisions of the Pledge Agreement are effective to create, in
favor of [the Collateral Agent], a legal, valid and enforceable Lien on or in
all of the Collateral which Lien shall be, upon the taking of possession by the
Collateral Agent of the applicable stocks certificates as contemplated by
Section 5 of the Pledge Agreement and the filing of UCC financing statements
with the Secretary of the State of the State of Connecticut, a perfected first
priority Lien.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of
others;
(b) to the best knowledge of the Company, no product of the Company
or any of its Subsidiaries infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent,
9
<PAGE>
copyright, service mark, trademark, trade name or other right owned or
used by the Company or any of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase price of the
Notes to be purchased by you.
10
<PAGE>
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the Other Purchasers and one other Institutional
Investor, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in the Memorandum. Taking into account such application of the proceeds
of the sale of the Notes, the purchase of the Notes as contemplated hereunder
will not constitute an extension of credit secured directly or indirectly by
margin stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207) and you shall not be obligated to require
the Company to execute a Form F.R. G-3 under said Regulation G. No part of the
proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in this
Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have
the meanings assigned to them in said Regulation G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of the date hereof, since which date there has been no Material
change in the amounts, interest rates, sinking funds, installment payments or
maturities of the Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is currently
in effect, in the payment of any principal or interest on any Indebtedness of
the Company or such Subsidiary and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a
11
<PAGE>
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 10.7.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
in Connecticut Natural Gas Corporation's most recent Annual Report on Form 10-K
previously furnished to you,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets
or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable
12
<PAGE>
Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
5.19. REPRESENTATIONS IN TRANSACTION DOCUMENTS.
The representations and warranties of the Company in each other
Transaction Document to which the Company is a party and of each Subsidiary in
its Subsidiary Guarantee are true and correct.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
PROVIDED that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" (as the term
is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July
12, 1995)) in respect of which the reserves and liabilities (as defined
by the annual statement for life insurance companies approved by the
National Association of Insurance Commissioners (the "NAIC ANNUAL
STATEMENT")) for the general account contract(s) held by or on behalf of
any employee benefit plan together with the amount of the reserves and
liabilities for the general account contract(s) held by or on behalf of
any other employee benefit plans maintained by the same employer (or
affiliate thereof as defined in PTE 95-60) or by the same employee
organization in the general account do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual
Statement filed with your state of domicile; or
(b) the Source is a separate account that is maintained solely in
connection with your fixed contractual obligations under which the
amounts payable, or credited, to any employee benefit plan (or its
related trust) that has any interest in such separate account
13
<PAGE>
(or to any participant or beneficiary of such plan (including any
annuitant)) are not affected in any manner by the investment performance
of the separate account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of the PTE
91-38 (issued July 12, 1991) and, except as you have disclosed to the
Company in writing pursuant to this paragraph (b), no employee benefit
plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (I) the identity
of such QPAM and (II) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (f); or
(g) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN" and "SEPARATE
ACCOUNT" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
14
<PAGE>
(a) QUARTERLY STATEMENTS -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than
the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
stockholder's equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments;
(b) ANNUAL STATEMENTS -- within 105 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
stockholder's equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists,
15
<PAGE>
specifying the nature and period of the existence thereof (it being
understood that such accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of any Default or
Event of Default unless such accountants should have obtained
knowledge thereof in making an audit in accordance with generally
accepted auditing standards or did not make such an audit);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming available,
one copy of (I) each financial statement, report, notice or proxy
statement sent by the Company, CTG, any CTG Subsidiary or any Subsidiary
to public securities holders generally, and (II) each regular or periodic
report (including Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q), each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company, CTG, any CTG Subsidiary or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company,
CTG, any CTG Subsidiary or any Subsidiary to the public concerning
developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default
hereunder or that any Person has given any notice or taken any action
with respect to a claimed default of the type referred to in Section
11(f), a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title
16
<PAGE>
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien
on any of the rights, properties or assets of the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise
tax provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably be
expected to have a Material Adverse Effect;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating
to any order, ruling, statute or other law or regulation that could
reasonably be expected to have a Material Adverse Effect; and
(g) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.3, 10.4, 10.5, 10.7(i),
10.8 and 10.9 during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date
of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists (including, without limitation, any such event or condition
resulting from the failure of the Company or any Subsidiary to comply
with any Environmental Law), specifying the nature and period of
existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
17
<PAGE>
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) DEFAULT -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company
and its Subsidiaries), all at such times and as often as may be
requested.
8. INTEREST ON THE NOTES; PREPAYMENT OF THE NOTES.
8.1. INTEREST ON THE NOTES.
(a) Interest will accrue and be payable on the Notes in the amounts
and at the times specified in the first paragraph thereof. Notwithstanding
anything above or in the Notes to the contrary, upon the occurrence and during
the continuance of a Credit Rating Event interest shall accrue and be payable on
the Notes at a rate that is 0.50% per annum above the rate of interest that
would otherwise be applicable to the Notes pursuant to the first paragraph
thereof.
(b) For purposes of subsection (a) above, a "CREDIT RATING EVENT"
shall have occurred upon, and shall continue for so long as, (i) the senior
unsecured long-term debt of any CTG Subsidiary shall be rated BBB- or less by
Standard & Poor's or Baa3 or less by Moody's or (ii) the rating of the senior
unsecured long-term debt of all of the CTG Subsidiaries shall have been
withdrawn or otherwise not maintained by Standard & Poor's or Moody's.
8.2. REQUIRED PREPAYMENTS.
On May 1, 2001 and on each November 1 and May 1 thereafter to and
including May 1, 2008 the Company will prepay $2,500,000 principal amount (or
such lesser principal amount as shall then be outstanding) of the Notes at par
and without payment of the Make-
18
<PAGE>
Whole Amount or any premium, PROVIDED that upon any partial prepayment of the
Notes pursuant to Section 8.3 or 8.4 the principal amount of each required
prepayment of the Notes becoming due under this Section 8.2 on and after the
date of such prepayment or purchase shall be reduced in the same proportion as
the aggregate unpaid principal amount of the Notes is reduced as a result of
such prepayment.
8.3. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as in Section 8.5, prepay
at any time all, or from time to time any part of, the Notes, in an amount not
less than $1,000,000 in the case of a partial prepayment, at 100% of the
principal amount so prepaid, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount.
8.4. PREPAYMENT IN CONNECTION WITH A CHANGE OF CONTROL.
(a) Promptly and in any event within five Business Days after any
Responsible Officer has knowledge of the occurrence of a Change of Control, the
Company shall give written notice thereof to the holders of all outstanding
Notes, which notice shall (I) refer specifically to this Section 8.4 and
describe the Change of Control in reasonable detail (including the Persons party
thereto), (II) specify a date not less than 30 days and not more than 60 days
after the date of such notice (the "CONTROL PREPAYMENT DATE") and (III) offer to
prepay on the Control Prepayment Date all (but not less than all) the Notes, at
100% of the principal amount thereof, together with interest accrued thereon to
the Control Prepayment Date, plus the applicable Make-Whole Amount determined
for the Control Prepayment Date with respect to such principal amount. Each
holder of a Note shall notify the Company of such holder's acceptance or
rejection of such offer by giving written notice of such acceptance or rejection
to the Company on a date (the "CONTROL RESPONSE DATE") at least 10 days prior to
the Control Prepayment Date, and the Company shall prepay on the Control
Prepayment Date all of the Notes held by each holder of Notes that has accepted
such offer in accordance with this Section 8.4(a) at a price in respect of each
Note held by such holder equal to 100% of the principal amount thereof, together
with interest accrued thereon to the Control Prepayment Date, plus the
applicable Make-Whole Amount determined for the Control Prepayment Date with
respect to such principal amount; PROVIDED, however, that the failure by a
holder of any Note to respond to such offer in writing on or before the Control
Response Date shall be deemed to be an acceptance of such offer.
(b) A "CHANGE OF CONTROL" will be deemed to have occurred for
purposes of Section 8.4(a) if any Person or Persons acting in concert, together
with Affiliates thereof, shall in the aggregate, directly or indirectly, control
or own (beneficially or otherwise) more than 45% of the total voting power of
all classes of CTG's then outstanding voting securities.
19
<PAGE>
8.5. NOTICES, ETC; CALCULATION OF MAKE-WHOLE AMOUNTS.
(a) The Company will give each holder of Notes written notice of each
optional prepayment under Section 8.3 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall
specify such date, the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid,
and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid.
(b) Each notice of optional prepayment pursuant to Section 8.3 and
each notice of prepayment pursuant to Section 8.4(a), shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated applicable
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation, and two Business Days prior to each such prepayment, the
Company shall deliver to each holder of Notes to be prepaid a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.
(c) In the event the Company shall incorrectly determine the
Make-Whole Amount payable in connection with any Note to be prepaid pursuant to
Section 8.3 or 8.4(a) or declared to be immediately due and payable pursuant to
Section 12.1 hereof, the holder of such Note shall not be bound by such
incorrect determination but, instead, shall be entitled to receive an amount
equal to the Make-Whole Amount, if any, determined by the Required Holders, in
the case of Section 8.3, and in all other cases, by such holder in compliance
with the terms of this Agreement, which determination shall be, absent manifest
error, conclusive.
8.6. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes pursuant to
Section 8.2 or 8.3, the principal amount of the Notes to be prepaid shall be
allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
8.7. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and
20
<PAGE>
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
8.8. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.9. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, PROVIDED that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.3 or 8.4 or has
become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the
Notes is payable) equal to the Reinvestment Yield with respect to such
Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (I) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as Bloomberg Financial Markets "Page PX7" (or
such other display as may replace Bloomberg Financial Markets Page PX7)
for actively traded U.S. Treasury securities having a maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date, or (II) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of
21
<PAGE>
such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (A) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (B) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the duration closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (I) such Called Principal into (II) the sum of the products
obtained by multiplying (A) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (B) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior
to its scheduled due date, PROVIDED that if such Settlement Date is not a
date on which interest payments are due to be made under the terms of the
Notes, then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement Date
and required to be paid on such Settlement Date pursuant to Section 8.3,
8.4 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant
to Section 8.3 or 8.4 or has become or is declared to be immediately due
and payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
22
<PAGE>
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, PROVIDED that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, PROVIDED
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (I) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (II) the nonpayment of all such taxes, assessments and
claims in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
9.5. CORPORATE EXISTENCE, ETC.
Subject to Section 10.2, the Company will at all times preserve and
keep in full force and effect its corporate existence. The Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Subsidiaries (unless merged into the Company or a Subsidiary) and all
rights and franchises of the Company and its Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually
23
<PAGE>
or in the aggregate, have a Material Adverse Effect (it being understood that
the Company may sell or otherwise dispose of ENServe, Incorporated and KBC
Energy Services of New England (either through the sale of the stock thereof or
the sale of all or substantially all of the assets thereof) and may dissolve ENI
Gas Services, Inc. in connection therewith).
9.6. SUBSIDIARY GUARANTEES, ETC.
If on any date the Company or any of its Subsidiaries creates a
Subsidiary or acquires a Person which thereupon becomes a Subsidiary, the
Company shall promptly, and in any event within 30 days of such creation or
acquisition, (i) cause such Subsidiary to execute and deliver to each holder of
a Note a Subsidiary Guarantee and (ii) cause all shares of common stock of such
Subsidiary owned by the Company or another Subsidiary to be pledged to the
Collateral Agent pursuant to the Pledge Agreement.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. TRANSACTIONS WITH AFFILIATES.
Except for the Forward Equity Purchase Agreement as in effect on the
date of the Closing, the Company will not and will not permit any Subsidiary to
enter into directly or indirectly any transaction or group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
10.2. MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the
case may be, shall be a solvent corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Company is not such corporation, (I)
such corporation shall have executed and delivered to each holder of any
Notes its assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement, the Notes and the other
Transaction Documents to which the Company is a party and (II) the
Company shall have caused to be delivered to each holder of any
24
<PAGE>
Notes an opinion of nationally recognized independent counsel, or other
independent counsel reasonably satisfactory to the Required Holders, to
the effect that all agreements or instruments effecting such assumption
are enforceable in accordance with their terms and comply with the terms
hereof; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing and the Company
could incur at least $1.00 of interest bearing Indebtedness under Section
10.5(d).
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under this Agreement or the Notes.
10.3. CONSOLIDATED NET WORTH.
The Company will not, at any time, permit Consolidated Net Worth to be
less than 100% of the amount thereof as of September 30, 1997.
10.4. DEBT SERVICE COVERAGE RATIO.
The Company will not, at any time, permit the Debt Service Coverage
Ratio to be less than 1.25 to 1.0.
10.5. INDEBTEDNESS.
The Company will not, and will not permit any Subsidiary to, incur,
create, assume or otherwise become or be liable in respect of any Indebtedness,
except
(a) the Notes;
(b) the Indebtedness outstanding under the Credit Agreement in an
aggregate principal amount of not greater than $20,000,000;
(c) Indebtedness outstanding on the date hereof as specified in
Schedule 5.15, but not any extension, renewal or refunding thereof unless
permitted by subsection (d) below; and
(d) additional Indebtedness if on the date such Indebtedness is
incurred and after giving effect thereto and to the concurrent retirement
of any Indebtedness the Pro Forma Interest Coverage Ratio would not be
less than 2.0 to 1.0.
25
<PAGE>
10.6. INTERCOMPANY INDEBTEDNESS.
The Company will not, and will not permit any Subsidiary to, incur,
create, assume or otherwise become liable in respect of any Indebtedness owing
to any Subsidiary (the "PAYEE SUBSIDIARY") unless the Payee Subsidiary is a
Wholly-Owned Subsidiary and such Indebtedness is unsecured and is subordinated
in right of payment pursuant to subordination provisions in the form of Exhibit
A to (x) in the case of the Company, the Company's obligations with respect to
the Notes and (y) in the case of any Subsidiary, such Subsidiary's obligations
under its Subsidiary Guarantee.
10.7. LIENS.
The Company will not, and will not permit any Subsidiary to, create,
assume, incur or suffer to exist any Lien upon or with respect to any property
or assets, whether now owned or hereafter acquired, of the Company or any
Subsidiary, excluding from the operation of this Section:
(a) Liens created pursuant to the Pledge Agreement;
(b) Liens existing on the date hereof securing Indebtedness of the
Company or any Subsidiary outstanding on the date hereof and specified in
Schedule 5.15;
(c) Liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security
or retirement benefits and Liens (for sums not yet due) of carriers,
warehousemen, mechanics and other similar Liens, in each case incurred or
made in the ordinary course of business and not in connection with the
incurrence of Indebtedness;
(d) Liens for taxes, assessments or governmental charges or levies
either not yet due and payable or to the extent that nonpayment thereof
is permitted by the proviso to Section 9.4;
(e) Liens (including Liens securing obligations in respect of Capital
Leases) to secure Indebtedness incurred in connection with the financing
of all or a part of the purchase price or cost of improvement of property
acquired or improved by the Company or a Subsidiary after the date
hereof, PROVIDED that (I) the aggregate principal amount of Indebtedness
secured by such Lien in respect of any such property or improvement and
all other Indebtedness secured by a Lien on such property or improvement
shall not exceed the lesser of (x) the cost of such property or
improvement and (y) the fair market value of such property or
improvement, (II) such Lien shall not extend to or cover any other
property of the Company or such Subsidiary and (III) such Lien shall be
created contemporaneously with, or within 12 months after, the
acquisition or improvement of such property;
26
<PAGE>
(f) Liens created by or resulting from any litigation or legal
proceeding that is effectively stayed while the underlying claims are
being contested in good faith by appropriate proceedings and with respect
to which the Company or such Subsidiary has established adequate reserves
on its books in accordance with GAAP;
(g) any extension, renewal or replacement of any Lien described in
Subsections (a), (b) or (e) above, PROVIDED that the principal amount of
Indebtedness secured thereby immediately before giving effect to such
extension, renewal or replacement is not increased and such Lien is not
extended to any other property; and
(h) Liens incurred by the Company or any Subsidiary in addition to
those described in Subsections (a) through (g) above, PROVIDED that, upon
the incurrence thereof and immediately after giving effect thereto, (X)
the aggregate amount of Priority Indebtedness does not exceed 20% of
Consolidated Net Worth and (Y) the Company would be able to incur at
least $1.00 of additional interest bearing Indebtedness under Section
10.5(d).
10.8. SALE AND LEASEBACKS.
The Company will not, and will not permit any Subsidiary to, enter
into any Sale and Leaseback Transaction unless, immediately after giving effect
thereto, (x) the aggregate amount of Priority Indebtedness does not exceed 20%
of Consolidated Net Worth and (y) the Company would be able to incur at least
$1.00 of additional interest bearing Indebtedness under Section 10.5(d).
10.9. RESTRICTED PAYMENTS.
The Company will not, and will not permit any Subsidiary to, at any
time, declare or make, or incur any liability to declare or make, any Restricted
Payment unless immediately after giving effect to such action (x) no Default or
Event of Default shall have occurred and be continuing, (y) the Company would be
able to incur at least $1.00 of additional interest bearing Indebtedness under
Section 10.5(d) and (z) the aggregate amount of Restricted Payments of the
Company and its Subsidiaries for the period commencing on the Closing Date and
ending on the date such Restricted Payment is declared or made, inclusive, would
not exceed Consolidated Net Income for such period.
10.10. AMENDMENTS, ETC. TO FORWARD EQUITY PURCHASE AGREEMENT.
The Company will not (i) terminate, or accept the termination of, the
Forward Equity Purchase Agreement or (ii) consent to any amendment,
modification, supplement or waiver to or of the Forward Equity Purchase
Agreement without the written approval of the Required Holders.
27
<PAGE>
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with any
term contained in Sections 10.3 to 10.10, inclusive; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) or any other Transaction Document to
which the Company is a party and such default is not remedied within 30
days after the earlier of (I) a Responsible Officer obtaining actual
knowledge of such default and (II) the Company receiving written notice
of such default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf of
the Company, CTG, any CTG Subsidiary or any Subsidiary or by any officer
of the Company, CTG, any CTG Subsidiary or any Subsidiary in this
Agreement or any other Transaction Document or in any writing furnished
in connection with the transactions contemplated hereby or thereby proves
to have been false or incorrect in any material respect on the date as of
which made; or
(f) (I) the Company or any CTG Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness (that, in
the case of a CTG Subsidiary only, is outstanding in an aggregate
principal amount of at least $1,000,000), in any case beyond any period
of grace provided with respect thereto, or (II) the Company or any CTG
Subsidiary is in default in the performance of or compliance with any
term of any evidence of any Indebtedness (that, in the case of a CTG
Subsidiary only, is outstanding in an aggregate principal amount of at
least $1,000,000), or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated maturity or before
its regularly scheduled dates of payment, or (III) as a consequence of
the occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Indebtedness to convert
such Indebtedness
28
<PAGE>
into equity interests), (X) the Company or any CTG Subsidiary has become
obligated to purchase or repay any Indebtedness before its regular
maturity or before its regularly scheduled dates of payment (that, in the
case of a CTG Subsidiary only, is outstanding in an aggregate principal
amount of at least $1,000,000), or (Y) one or more Persons have the right
to require the Company or any CTG Subsidiary so to purchase or repay such
Indebtedness; or
(g) CTG, the Company or any CTG Subsidiary (I) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (II) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy, insolvency, reorganization, moratorium or other similar
law of any jurisdiction, (III) makes an assignment for the benefit of its
creditors, (IV) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (V) is adjudicated as
insolvent or to be liquidated, or (VI) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by CTG, the Company or any
CTG Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of CTG, the Company or any CTG Subsidiary, or any such
petition shall be filed against CTG, the Company or any CTG Subsidiary
and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $500,000 are rendered against one or more of the
Company and its Subsidiaries and which judgments are not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 60 days after the expiration of such stay; or
(j) if (I) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (II) a notice of intent
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (III) the
aggregate "amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $1,000,000, (IV) the Company or any
ERISA
29
<PAGE>
Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (V) the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(VI) the Company or any Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a
manner that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect;
or
(k) any Subsidiary Guarantee ceases to be in full force and effect or
any Subsidiary or any Person acting on behalf of any Subsidiary contests
in any manner the validity, binding nature or enforceability of its
Subsidiary Guarantee; or
(l) the Forward Equity Purchase Agreement ceases to be in full force
and effect on CTG or any Person acting on behalf of CTG contests in any
manner the validity, binding nature or enforceability of such Agreement
or CTG fails to receive sufficient dividends from its Subsidiaries or
proceeds from the sale of CTG stock in the open market to enable it to
make all required payments thereunder or CTG otherwise defaults in the
payment or performance of any of its obligations thereunder; or
(m) the Liens created pursuant to the Pledge Agreement cease to
constitute a valid and perfected first priority Lien on the collateral
intended to be covered thereby in favor of the Collateral Agent or the
Pledge Agreement otherwise ceases to be in full force or effect or the
Company or any Person acting on behalf of the Company contests in any
manner the validity, binding nature or enforceability of the Pledge
Agreement or such Liens; or
(n) the total tangible assets of CTG and its Subsidiaries determined
on a consolidated basis in accordance with GAAP (as reported on the
balance sheet included in CTG's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission) are less than
$400,000,000 or the tangible net worth of CTG and its Subsidiaries
determined on a consolidated basis in accordance with GAAP is less than
$100,000,000; or
(o) CTG ceases to own free and clear of any Lien all of the
outstanding shares of common stock of each of the Company and CNG; or
(p) CTG incurs, creates, assumes, guarantees or otherwise becomes
liable with respect to any Indebtedness.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
30
<PAGE>
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (X) all accrued and
unpaid interest thereon and (Y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
31
<PAGE>
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to paragraph (b) or (c) of Section 12.1, the Required Holders, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (A) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (B) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and
(C) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof or by any other Transaction Document to which the Company is a party
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
32
<PAGE>
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, PROVIDED that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $50,000,000, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
33
<PAGE>
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in New
York, New York at the principal office of [Specify Bank] in such jurisdiction.
The Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Company in such jurisdiction or the principal office
of a bank or trust company in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement, the Notes or any other Transaction
Document (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (A) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes or any other Transaction Document or in
responding to any subpoena or other legal process or
34
<PAGE>
informal investigative demand issued in connection with this Agreement, the
Notes or any other Transaction Document, or by reason of being a holder of any
Note, and (B) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement or any other
Transaction Document to which the Company is a party shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement, the Notes and the Transaction Documents
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (A) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (B) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (I) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (II) change the percentage of the principal
35
<PAGE>
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (III) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
36
<PAGE>
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (A) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid) or (B) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of the Chief Financial Officer,
or at such other address as the Company shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (A) consents, waivers and modifications that may hereafter be
executed, (B) documents received by you at the Closing (except the Notes
themselves), and (C) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, PROVIDED that such
37
<PAGE>
term does not include information that (A) was publicly known or otherwise known
to you prior to the time of such disclosure, (B) subsequently becomes publicly
known through no act or omission by you or any person acting on your behalf,
(C) otherwise becomes known to you other than through disclosure by the Company
or any Subsidiary or (D) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, PROVIDED that you may deliver or disclose Confidential
Information to (I) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (II) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (III) any other holder of any Note, (IV) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this
Section 20), (V) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(VI) any federal or state regulatory authority having jurisdiction over you,
(VII) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (VIII) any other Person to which
such delivery or disclosure may be necessary or appropriate (W) to effect
compliance with any law, rule, regulation or order applicable to you, (X) in
response to any subpoena or other legal process, (Y) in connection with any
litigation to which you are a party or (Z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the
38
<PAGE>
Notes then held by such Affiliate, upon receipt by the Company of notice of such
transfer, wherever the word "you" is used in this Agreement (other than in this
Section 21), such word shall no longer be deemed to refer to such Affiliate, but
shall refer to you, and you shall have all the rights of an original holder of
the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart
39
<PAGE>
may consist of a number of copies hereof, each signed by less than all, but
together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Connecticut excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
* * * * *
40
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
THE ENERGY NETWORK, INC.
By______________________________________
Title:
The foregoing is hereby
agreed to as of the
date thereof.
METROPOLITAN LIFE INSURANCE COMPANY
By__________________________
Title:
41
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
THE ENERGY NETWORK, INC.
By______________________________________
Title:
The foregoing is hereby
agreed to as of the
date thereof.
TEXAS LIFE INSURANCE COMPANY
By____________________
Title:
41
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to Be Purchased
- ----------------------------- ---------------------
METROPOLITAN LIFE INSURANCE COMPANY $42,000,000
(1) All payments on or in respect
of the Notes to be by bank wire
transfer of Federal or other
immediately available funds, for
receipt not later than 12:00 noon
(New York time) on the
date payment is due, to:
The Chase Manhattan Bank
33 East 23rd Street
New York, NY 10010
Account No.: 002-2-410591
ABA No.: 021000021
Each such wire transfer shall set forth the name of The Energy Network,
Inc., the full title (including the coupon rate and final maturity date)
of the Notes, a reference to the PPN, and the due date and application
(as among principal, premium and interest) of the payment being made.
(2) Address for all notices and other communications:
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Telephone No. (212) 578-5705
Telecopier No. (212) 578-0266
Attention: Treasurer
<PAGE>
SCHEDULE A
----------
With a duplicate copy to:
Metropolitan Life Insurance Company
334 Madison Avenue
Convent Station, New Jersey 07961
Telephone: (201) 254-3000
Telecopier: (201) 254-3050
Attention: Vice President - Private Placement Unit
(3) Tax Identification No.: 13-5581829
2
<PAGE>
Principal Amount of
Name and Address of Purchaser Notes to Be Purchased
- ----------------------------- ---------------------
TEXAS LIFE INSURANCE COMPANY $3,000,000
(1) All payments by wire transfer of
immediately available funds to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1508
Account No.: 900-9-000200
ABA No.: 021000021
With reference to PPN No.:
with sufficient information
to identify the source and
application of such funds.
(2) Address for notices and other
communications:
Texas Life Insurance Company
900 Washington Avenue
Waco, TX 76701
Attention: Virginia Crunk
With a copy to:
Metropolitan Life Insurance Company
334 Madison Avenue
Convent Station, NJ 07961-0633
Attention: Vice President
Telecopier: (973) 254-3050
(3) Tax Identification No.: 74-0940890
<PAGE>
SCHEDULE B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 5% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
5% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"ATTRIBUTABLE DEBT" means, as to any particular lease relating to a
Sale and Leaseback Transaction, the present value of all lease rentals required
to be paid by the Company or any Subsidiary under such lease during the
remaining term thereof (determined in accordance with generally accepted
financial practice using a discount factor equal to the interest rate implicit
in such lease).
"BANK" means Fleet National Bank, a national banking association.
"BUSINESS DAY" means (A) for the purposes of Section 8.9 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (B) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City or Hartford, Connecticut are
required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"CHANGE OF CONTROL" is defined in Section 8.4.
"CLOSING" is defined in Section 3.
<PAGE>
"CNG" means Connecticut National Gas Corporation, a [Connecticut]
corporation.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COLLATERAL" has the meaning assigned to such term in the Pledge
Agreement.
COLLATERAL AGENCY AGREEMENT" means the Collateral Agency Agreement
dated as of the date hereof substantially in the form of Exhibit B between the
Collateral Agent, the Bank, The Bank of Nova Scotia, you and the Other
Purchaser.
"COLLATERAL AGENT" means State Street Bank and Trust Company in its
capacity as collateral agent pursuant to the Collateral Agency Agreement.
"COMPANY" means The Energy Network, Inc., a Connecticut corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSENT" means the Consent of CTG and Agreement dated as of the date
hereof substantially in the form of Exhibit C.
"CONSOLIDATED ADJUSTED EBITDA" means, with respect to any period, the
sum of (i) Consolidated Net Income for such period, (ii) all FEPA Payments
received by the Company during such period and (iii) all amounts deducted in the
computation of Consolidated Net Income for such period on account of (w)
Interest Charges, (x) taxes imposed on or measured by income, (y) depreciation
and (z) amortization.
"CONSOLIDATED NET INCOME" means, with respect to an period, the net
earnings (or loss) of the Company and its Subsidiaries for such period,
determined for each in accordance with, and consolidated in accordance with,
GAAP, excluding:
(i) proceeds of life insurance policies;
(ii) gains arising from (a) the sale or disposition of any assets
which are not current assets, (b) any write-up subsequent to the Closing
Date in the book value of any asset owned by the Company or a Subsidiary
and (c) the acquisition of debt securities for a cost less than principal
and accrued interest;
(iii) the net income of any Person other than a Subsidiary in which
the Company or a Subsidiary has any form of equity interest, except to
the extent such
2
<PAGE>
Person's net income has been actually distributed and received by the
Company or a Subsidiary in the form of cash or other property (the latter
valued at the fair market value thereof at time of distribution as
determined by the Company's independent public accountants);
(iv) earnings of any Subsidiary accrued prior to the date it became
a Subsidiary;
(v) any portion of the net earnings of any Subsidiary which for any
reason is unavailable for payment of dividends to the Company or any
other Subsidiary;
(vi) extraordinary gains and losses (including, without limitation,
capital gains or losses in aggregate amounts exceeding $100,000 in any
one fiscal year, and extraordinary charges or credits);
(vii) any amounts paid or payable in any currency that at the time of
determination of Consolidated Net Income is not fully convertible into
United States dollars;
(viii) net earnings of any successor to or transferee corporation of
the Company prior to consummation of the transaction that resulted in
such consolidation, merger or transfer of assets;
(ix) any deferred credit (or amortization of a deferred credit)
arising from the acquisition in any manner of any other Person; and
(x) income from any transactions with any Affiliates of the Company
unless received in cash.
"CONSOLIDATED NET WORTH" means the consolidated stockholder's equity
of the Company and its Subsidiaries determined in accordance with GAAP.
"CREDIT AGREEMENT" means, collectively, the 364-Day Revolving Credit
Agreement and the 3-Year Revolving Credit Agreement, each dated as of the date
hereof, between the Company and the Bank.
"CTG" means CTG Resources, Inc., a Connecticut corporation.
"CTG SUBSIDIARY" means any Subsidiary of CTG other than the Company.
3
<PAGE>
"DEBT SERVICE" means, with respect to any period, the sum of the
following: (i) Interest Charges for such period and (ii) all payments of
principal in respect of Indebtedness of the Company and its Subsidiaries
(including the principal component of any payments in respect of Capital Lease
Obligations) paid or payable during such period after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP.
"DEBT SERVICE COVERAGE RATIO" means, at any time, the ratio of (i)
Consolidated Adjusted EBITDA for the period of four consecutive fiscal quarters
ending on, or most recently ended prior to, such time to (ii) Debt Service for
such period.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means an interest rate of 8.99% per annum.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FEPA PAYMENTS" means all payments in cash by CTG to the Company under
the Forward Equity Purchase Agreement.
"FORWARD EQUITY PURCHASE AGREEMENT" means the Forward Equity Purchase
Agreement dated as of the date hereof between CTG and the Company.
4
<PAGE>
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (I) for the purchase or payment of
such indebtedness or obligation, or (II) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
5
<PAGE>
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" with respect to any Person means, on any date, all
indebtedness, obligations and liabilities for borrowed money which in accordance
with GAAP would be included as a liability on a balance sheet of such Person as
of such date, and in any event shall include, without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement
with respect to any such property);
(c) all Capital Leases Obligations of such Person;
(d) all liabilities secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) all liabilities with respect to any agreement to pay the
purchase price of any product or service where such agreement to pay is
not dependent upon whether such product or service is furnished; and
6
<PAGE>
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"INSTITUTIONAL INVESTOR" means (A) any original purchaser of a Note,
(B) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (C) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"INTEREST CHARGES" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (i) all interest in respect of Indebtedness of the Company and its
Subsidiaries (including imputed interest on Capital Lease Obligations and
Attributable Debt) deducted in determining Consolidated Net Income for such
period, together with all interest capitalized or deferred during such period
and not deducted in determining Consolidated Net Income for such period, and
(ii) all debt discount and expense amortized or required to be amortized in the
determination of Consolidated Net Income for such period.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.9.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (A) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (B) the ability of the Company
to perform its obligations under this Agreement, the Notes or any other
Transaction Document to which the Company is a party, or
7
<PAGE>
(C) the validity or enforceability of this Agreement, the Notes or any other
Transaction Document to which the Company is a party.
"MEMORANDUM" is defined in Section 5.3.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PLEDGE AGREEMENT" means the Pledge and Assignment Agreement dated as
of the date hereof between the Company and [the Collateral Agent] substantially
in the form of Exhibit D.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
8
<PAGE>
"PRIORITY INDEBTEDNESS" means, without duplication, the sum of (i) all
Indebtedness of the Company secured by Liens pursuant to Section 10.7(i), (ii)
all Attributable Debt of the Company and its Subsidiaries and (iii) all
Indebtedness of Subsidiaries other than Indebtedness owing to the Company or
permitted pursuant to Section 10.6.
"PRO FORMA INTEREST CHARGES" means, at any time, the net amount of (i)
Interest Charges for the period of four consecutive fiscal quarters ending on,
or most recently ended prior to, such time MINUS (ii) all such Interest Charges
in respect of Indebtedness of the Company or any Subsidiary being retired out of
the proceeds of any Indebtedness being created, incurred or assumed at such time
PLUS (iii) scheduled Interest Charges for the period of 12 full calendar months
next succeeding such time in respect of the Indebtedness being created, incurred
or assumed at such time. For the purposes of the foregoing clause (iii),
Indebtedness that bears interest at a variable rate will be deemed to bear
interest during the period in question at a rate equal to the rate in effect at
such time.
"PRO FORMA INTEREST COVERAGE RATIO" means, at any time, the ratio of
(i) Consolidated Adjusted EBITDA for the period of four consecutive fiscal
quarters ending on, or most recently ended prior to, such time to (ii) Pro Forma
Interest Charges.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of a majority in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"RESTRICTED PAYMENT" means
(i) any dividend or other distribution, direct or indirect, on or
on account of any shares of capital stock of any class of the Company,
except a dividend payable solely in such shares;
9
<PAGE>
(ii) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of capital stock of any class of the
Company or of any warrants, rights or options to purchase or otherwise
acquire any such shares, in any manner other than (x) solely in exchange
for other such shares or (y) unless such redemptions, retirement,
purchase or other acquisition shall be made contemporaneously from the
net proceeds of a sale of such stock, warrants, rights or options; and
(iii) any prepayment, payment, purchase or other retirement or
acquisition, direct or indirect, by the Company or any Subsidiary of all
or part of the principal amount of any subordinated debt (except out of
the proceeds of a substantially concurrent issuance of other subordinated
debt) prior to the regularly scheduled maturity date thereof (as in
effect on the date such subordinated debt was incurred).
"SALE AND LEASEBACK TRANSACTION" means a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall sell or
transfer to any Person (other than the Company or a Subsidiary) any property,
whether now owned or hereafter acquired, and, as part of the same transaction or
series of transactions, the Company or any Subsidiary shall rent or lease as
lessee or similarly acquire the right to possession or use of, such property or
one or more properties which it intends to use for the same purpose or purposes
as such property.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"STANDARD & POOR'S" means Standard & Poor's Rating Group, a division
of McGraw-Hill, Inc.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
10
<PAGE>
"SUBSIDIARY GUARANTEE" means a guarantee of the obligations of the
Company under this Agreement and the Notes, substantially in the form of Exhibit
E.
"SUPPORT AGREEMENT" means the Support Agreement dated the date hereof
from CTG in favor of the holders from time to time of the Notes.
"TENDER OFFER" means the Tender Offer as defined and described in the
Memorandum.
"TRANSACTION DOCUMENTS" means this Agreement, the Other Agreements,
the Notes, the Pledge Agreement, each Subsidiary Guarantee, the Forward Equity
Purchase Agreement, the Consent, the Collateral Agency Agreement and the Support
Agreement.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.
11
<PAGE>
EXHIBIT 1
[FORM OF NOTE]
THE ENERGY NETWORK, INC.
6.99% SENIOR SECURED NOTE DUE 2009
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, THE ENERGY NETWORK, INC. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Connecticut, hereby promises to pay to [______________________], or
registered assigns, the principal sum of [_______________________________]
DOLLARS (or so much thereof as shall not have been prepaid) on November 1, 2009,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(A) on the unpaid balance thereof at the rate of 6.99% per annum from the date
hereof, payable quarterly, on the first day of February, May, August and
November in each year, commencing with the February 1, May 1, August 1 or
November 1 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (B) to the extent permitted by law, on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreements referred to below), payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand), at the
rate of 8.99% per annum. Notwithstanding anything to the contrary above, the
interest rate applicable to this Note may be increased by 0.50% as provided in
Section 10.1 of the Note Purchase Agreements referred to below.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of [Specify bank] in New York, New York or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreements referred to
below.
This Note is one of a series of Senior Secured Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of
October 1, 1997 (as from time to time amended, the "Note Purchase Agreements"),
between the Company and the respective Purchasers named therein and is entitled
to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (I) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreements and (II) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is secured by, and entitled to the benefits of, the Pledge
Agreement referred to in the Note Purchase Agreements. Payment of the principal
of, and Make-Whole
<PAGE>
Amount, if any, and interest on this Note has been guaranteed by the
Subsidiaries of the Company in accordance with the Subsidiary Guarantees
referred to in the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with the laws
of the State of Connecticut.
THE ENERGY NETWORK, INC.
By_________________________
Title:
2
<PAGE>
EXHIBIT 4.4(b)
MATTERS TO BE COVERED IN THE OPINION
OF SPECIAL COUNSEL TO THE PURCHASERS
1. The Notes not requiring registration under the Securities Act of
1933, as amended; no need to qualify an indenture under the Trust Indenture Act
of 1939, as amended.
2. Form and scope blessing of opinion of counsel for the Company.
<PAGE>
10/1/97
EXHIBIT A
FORM OF SUBORDINATION PROVISIONS
Section 1. [add name of Company or Subsidiary, as applicable], a
__________________, corporation (the "BORROWER"), and [add name of Subsidiary
lender] (the "SUBORDINATED LENDER"), covenant and agree, that [DESCRIBE
INDEBTEDNESS] (the "SUBORDINATED INDEBTEDNESS") shall be subordinate and junior
to all Senior Indebtedness (as hereinafter defined), to the extent and in the
manner hereinafter set forth.
ALTERNATIVE NO. 1 (FOR USE WHEN THE COMPANY IS THE BORROWER): [For
purposes hereof, "SENIOR INDEBTEDNESS" shall mean (1) all obligations of the
Borrower under the several Note Purchase Agreements dated as of October 1, 1997
among the Borrower and certain institutional investors named therein (herein, as
the same may be amended or supplemented from time to time, collectively referred
to as the "NOTE PURCHASE AGREEMENT"), including all fees and expenses payable by
the Borrower thereunder, (2) all principal of, and interest and Make-Whole
Amount (if any) on, the 6.99% Senior Secured Notes due 2009 issued in the
original aggregate principal amount of $45,000,000 by the Borrower pursuant to
the Note Purchase Agreement (together with any notes delivered in substitution
or exchange for said notes, the "NOTES") including, without limitation, any
interest accruing thereon after the commencement of any proceeding of the
character described in Section 11(g) or 11(h) of the Note Purchase Agreement and
(3) all extensions, refinancings, refundings or renewals of the liabilities of
the Borrower referred to in clauses (1) through (2) above.]
ALTERNATIVE NO. 2 (FOR USE WHEN A SUBSIDIARY IS THE BORROWER): [For
purposes hereof, "SENIOR INDEBTEDNESS" shall mean all obligations of the
Borrower under the Guarantee dated as of ______________ (the "GUARANTEE")
pursuant to which the Borrower has guaranteed the obligations of The Energy
Network, Inc. (the "COMPANY") under the Note Purchase Agreement dated as of
October 1, 1997 among the Company and certain institutional investors named
therein (herein, as the same may be amended or supplemented from time to time,
collectively referred to as the "NOTE PURCHASE AGREEMENT") and the Company's
6.99% Senior Secured Notes due 2009 issued thereunder in the original aggregate
principal amount of $45,000,000 and all extensions, refinancings, refundings or
renewals of the liabilities of the Borrower under the Guarantee.
Section 2. In the event of any liquidation, dissolution or other
winding up of the Borrower or of any receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or other similar proceeding relative
to the Borrower or its creditors or its property, all Senior Indebtedness shall
first be paid in full in cash before any payment or distribution of any kind or
character, whether in cash, property or securities shall be made upon or in
respect of the Subordinated Indebtedness, and any such payments or distributions
shall be paid over to the holders of such Senior Indebtedness for application to
the payment
<PAGE>
-2-
thereof, unless and until all Senior Indebtedness shall have been paid and
satisfied in full in cash.
Section 3. Until the Senior Indebtedness shall have been paid in full
in cash, no payment of any kind shall be made on the Subordinated Indebtedness,
whether of principal, premium or interest, (b) the Subordinated Lender shall not
take, demand or receive, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment for or in respect of the
Subordinated Indebtedness and (c) the Subordinated Lender shall not have any
right to accelerate the payment of Subordinated Indebtedness or exercise any
other remedies to enforce the payment thereof.
Section 4. If the Subordinated Lender shall receive any payment (of
any kind, whether or not in cash) in respect of the Subordinated Indebtedness
which is in violation of the requirements of Section 2 or 3, the Subordinated
Lender hereby agrees to hold such payment in trust for the benefit of the
holders of the Senior Indebtedness and to pay over such payment or any amount
equal thereto to the holders of the Senior Indebtedness on demand.
Section 5. Without notice to or the consent of the Subordinated
Lender, the holders of the Senior Indebtedness may, at any time and from time to
time, without impairing or releasing the subordination herein made, do any one
or more of the following:
(1) change the manner, place or terms of payment, or change or extend
the time of payment of or renew or alter, the Senior Indebtedness, or amend
or supplement in any manner the Note Purchase Agreement or any Subsidiary
Guarantee (as defined therein) or any other instrument securing or relating
to the Senior Indebtedness (including the Pledge Agreement, as defined in
the Note Purchase Agreement);
(2) release any person liable in any manner for the payment or
collection of the Senior Indebtedness;
(3) exercise or refrain from exercising any rights in respect of the
Senior Indebtedness against the Borrower or any other person;
(4) apply any monies or other property paid by any person or released
in any manner, to the Senior Indebtedness; or
(5) accept or release any security for the Senior Indebtedness.
Section 6. The Subordinated Lender hereby irrevocably authorizes and
empowers (without imposing any obligation on) the holders of the Senior
Indebtedness, under the circumstances set forth in Section 2 hereof, to demand,
sue for, collect and receive every
<PAGE>
-3-
payment or distribution upon or in respect of the Subordinated Indebtedness and
give acquittance therefor, to file claims and proofs of claims in any statutory
or nonstatutory proceeding, to vote the full amount of the Subordinated
Indebtedness which is owing in the sole discretion of the holders of the Senior
Indebtedness or their representative in connection with any resolution,
arrangement, plan of reorganization, compromise, settlement or extension and to
take all such other action (including, without limitation, the right to
participate in any composition of creditors and the right to vote at creditors'
meetings for the election of trustees, acceptance of plans and otherwise), in
the name of the holders of the Senior Indebtedness or in the name of the
Subordinated Lender or otherwise, as the holders of the Senior Indebtedness or
their representative may deem necessary or advisable for the enforcement of the
subordination provisions of this Subordinated Indebtedness. The Subordinated
Lender hereby agrees, under the circumstances set forth in Section 2 hereof,
duly and promptly to take such action as may be requested at any time and from
time to time by the holders of the Senior Indebtedness or their representative
to collect and receive any and all payments and distributions hereunder and to
file appropriate proofs of claim in respect thereof and to execute and deliver
such powers of attorney, assignments or other instruments as may be requested by
the holders of the Senior Indebtedness or their representative in order to
enable the holders of the Senior Indebtedness or their representative to enforce
any and all claims upon or in respect of this Subordinated Indebtedness and to
collect and receive any and all payments or distributions which may be payable
or deliverable at any time upon or in respect of this Subordinated Indebtedness.
<PAGE>
10/1/97
EXHIBIT C
AGREEMENT AND CONSENT
This AGREEMENT AND CONSENT, dated as of _____ __, 1997 (this
"CONSENT"), among CTG Resources, Inc., a Connecticut corporation (the
"CONSENTING PARTY"), The Energy Network, Inc., a Connecticut corporation (the
"COMPANY"), and State Street Bank and Trust Company, as collateral agent (in
such capacity, together with any successor thereto in such capacity, the
"COLLATERAL AGENT") for the benefit of the Collateral Agent and the Secured
Parties (as defined in the Pledge Agreement referred to below).
The Company and The Bank of Nova Scotia (the "LC PROVIDER") are
parties to a Letter of Credit and Reimbursement Agreement dated as of October
14, 1994 pursuant to which the LC Provider has issued its irrevocable standby
letter of credit in a stated amount of $13,767,123 on behalf of the Company (as
modified and supplemented and in effect from time to time, the "LC FACILITY").
The Company and Fleet National Bank (together with its successors and assigns,
the "BANK") are parties to a 364-Day Revolving Credit Agreement and a 3-Year
Reducing Revolving Credit Agreement, each dated as of October 1, 1997
(collectively, as modified and supplemented and in effect from time to time, the
"CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for
loans to be made by the Bank to the Company in an aggregate principal amount not
exceeding $20,000,000. The Company is party to the several Note Purchase
Agreements dated as of the date hereof (collectively, as modified and
supplemented and in effect from time to time, the "NOTE PURCHASE AGREEMENT")
with the institutional investors named therein (the "PURCHASERS") pursuant to
which the Company has issued its 6.99% Senior Secured Notes dues 2009 in the
aggregate principal amount of $45,000,000 (the "NOTES").
The Company and the Collateral Agent are parties to a Pledge and
Assignment Agreement dated as of the date hereof (the "PLEDGE AGREEMENT")
pursuant to which the Company has pledged to the Collateral Agent the Collateral
referred to therein as security for the Secured Obligations referred to therein,
including the Company's right, title and interest in the Forward Equity Purchase
Agreement dated as of the date hereof between the Consenting Party and the
Company (the "ASSIGNED AGREEMENT").
The Collateral Agent, the LC Provider, the Bank and the Purchasers are
party to a Collateral Agency Agreement dated as of the date hereof (the
"COLLATERAL AGENCY AGREEMENT").
It is a condition precedent to the Bank making loans under the Credit
Agreement, the Purchasers purchasing Notes under the Note Purchase Agreement and
the LC
<PAGE>
Provider amending the LC Facility that the Consenting Party execute and deliver
this Consent. Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. INCORPORATED TERMS. Unless otherwise indicated, each
capitalized term used herein and not defined herein shall have the meaning
ascribed to such term in the Pledge Agreement.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE CONSENTING PARTY
The Consenting Party represents and warrants as follows:
Section 2.01. DUE ORGANIZATION. The Consenting Party is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut.
Section 2.02. CORPORATE POWER. The Consenting Party has full power,
authority and legal right to execute and deliver this Consent and the Assigned
Agreement and to perform its obligations hereunder and thereunder.
Section 2.03. DUE AUTHORIZATION. The Consenting Party has taken all
necessary corporate and shareholder action to authorize the execution, delivery
and performance of this Consent and the Assigned Agreement.
Section 2.04. ENFORCEABILITY. This Consent and the Assigned
Agreement have been duly executed and delivered by the Consenting Party and
constitute the legal, valid and binding obligations of the Consenting Party
enforceable against the Consenting Party in accordance with their respective
terms, except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and (ii) the application of equitable principles
(whether considered in a court of law or a proceeding in equity).
Section 2.05. NO VIOLATION. The execution, delivery and performance
by the Consenting Party of this Consent and the Assigned Agreement do not and
will not (i) violate any applicable provision of any law, rule, regulation or
court order, (ii) result in any breach of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which the Consenting
Party is a party or by which it or any of its property or assets is bound or to
which it may be subject, or (iii) violate or conflict with any provision of the
charter documents or by-laws of the Consenting Party.
Section 2.06. GOVERNMENTAL APPROVALS. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
authority is required (i) in connection with the execution, delivery, or
performance of this Consent or the Assigned Agreement or (ii) for the validity
or enforceability of this Consent or the Assigned Agreement.
2
<PAGE>
ARTICLE III. CONSENT
Section 3.01. CONSENT TO ASSIGNMENTS, ETC. The Consenting Party
hereby:
(a) acknowledges that the Collateral Agent and the Secured Parties
are relying upon the execution, delivery and performance by the Consenting
Party of the Assigned Agreement and this Consent;
(b) consents to the Pledge Agreement and the assignment by the
Company to the Collateral Agent pursuant thereto of all of its right, title
and interest in the Assigned Agreement as collateral security for the
Secured Obligations;
(c) acknowledges the right of the Collateral Agent in the exercise of
its rights and remedies under the Pledge Agreement and at the times
provided for therein to make all demands, give all notices, take all
actions and exercise all rights and remedies of the Company under the
Assigned Agreement, except as otherwise expressly provided in the Pledge
Agreement, and agrees that in such event, the Consenting Party shall
continue to perform the obligations of the Consenting Party under the
Assigned Agreement;
(d) agrees that neither the Collateral Agent, as collateral assignee
of the Assigned Agreement, nor its designee, shall be subject to any duty
or obligation under the Assigned Agreement; and
(e) agrees that the Consenting Party will not, without the prior
written consent of the Collateral Agent, enter into any waiver, amendment,
supplement, or other modification of the Assigned Agreement.
Section 3.02. PAYMENT OF ASSIGNED SUMS. The Consenting Party shall
pay all monies that are due and payable to the Company under the Assigned
Agreement directly to the Collateral Account (or to such other account or such
other Person as the Collateral Agent shall have notified the Consenting Party in
writing) in immediately available funds on the date such monies are due. The
Consenting Party agrees that the amount of such payment shall not be reduced by
any defense, claim, counterclaim, offset or recoupment that the Consenting Party
may have against the Company. The Company hereby releases and agrees to hold
the Consenting Party harmless from all liability for making payments to the
Collateral Agent in accordance with the requirements of this Section 3.02.
Section 3.03. OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. The Consenting
Party's obligations hereunder are absolute and unconditional, and the Consenting
Party has no right, and shall have no right, to terminate this Consent or to be
released, relieved or discharged from any obligation or liability hereunder
until the termination of this Consent.
Section 3.04. REINSTATEMENT. This Consent shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or the other Secured Parties in respect of the
Secured Obligations is rescinded or must otherwise be restored or returned by
the Collateral Agent or the other Secured Parties by
3
<PAGE>
reason of the insolvency, bankruptcy or reorganization of the Company or for any
other reason, all as though such payments had not been made.
ARTICLE IV. MISCELLANEOUS
Section 4.01. TERMINATION. Except as otherwise provided for herein,
this Consent shall terminate when the Secured Obligations have been paid in full
and the obligations of the Bank under the Credit Agreement and the LC Provider
under the LC Facility shall have expired or been terminated.
Section 4.02. NOTICES. All notices and other communications
hereunder shall be in writing, shall be sent by first class mail, by personal
delivery, by a nationally recognized courier service, or by telecopy and shall
be directed to the addresses and telephone numbers listed on the signature page
hereto or to such other address or addressee as a party may designate by notice
given pursuant hereto.
Section 4.03. SEPARATE COUNTERPARTS; AMENDMENTS, WAIVER. This
Consent may be executed in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall constitute
one and the same instrument. Neither this Consent nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified except by an
instrument in writing signed by the Collateral Agent and by any other party
against whom any such amendment, supplement, waiver or modification is to be
enforced.
Section 4.04. SEVERABILITY OF PROVISIONS. Any provision of this
Consent which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 4.05. SUCCESSORS AND ASSIGNS. This Consent shall be binding
upon each of the Consenting Party and the Company, and on the permitted
successors and assigns of each of them, and shall inure to the benefit of the
Collateral Agent, the Secured Parties and their respective successors and
assigns; PROVIDED that the Consenting Party shall not transfer or assign all or
any portion of its obligations under this Consent or the Assigned Agreement
without the prior written consent of the Collateral Agent.
Section 4.06. THE COLLATERAL AGENT. The Consenting Party
acknowledges that the Collateral Agent, as agent for the Secured Parties, is
subject to the terms and conditions of the Collateral Agency Agreement and shall
act in exercising its rights and remedies hereunder (including, without
limitation, the giving of any consent, direction, amendment, modification or
waiver hereunder) with the consent of the Secured Parties in accordance with the
Collateral Agency Agreement.
Section 4.07. GOVERNING LAW. This Consent shall be construed and
enforced in accordance with the law of the State of Connecticut.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Consent
to be executed by its duly authorized officer as of the date first above
written.
CTG RESOURCES, INC.
By:____________________________
Name:
Title:
Address for Notice:
Attention:
Telephone Number:
Telecopier Number:
STATE STREET BANK AND TRUST
COMPANY,
as Collateral Agent
By:___________________________
Name:
Title:
Address for Notice:
Attention:
Telephone Number:
Telecopier Number:
5
<PAGE>
THE ENERGY NETWORK, INC.
By:___________________________
Address for Notice:
Attention:
Telephone Number:
Telecopier Number:
6
<PAGE>
10/1/97
EXHIBIT D
PLEDGE AND ASSIGNMENT AGREEMENT
PLEDGE AND ASSIGNMENT AGREEMENT dated as of October 1, 1997 between
The Energy Network, Inc., a Connecticut corporation (the "COMPANY"), and State
Street Bank and Trust Company, as agent for the Secured Parties referred to
below (in such capacity, together with its successors in such capacity, the
"COLLATERAL AGENT").
The Company and The Bank of Nova Scotia (the "LC PROVIDER") are
parties to a Letter of Credit and Reimbursement Agreement dated as of October
14, 1994 pursuant to which the LC Provider has issued its irrevocable standby
letter of credit in a stated amount of $13,767,123 on behalf of the Company (as
modified and supplemented and in effect from time to time, the "LC FACILITY").
The Company and Fleet National Bank (together with its successors and assigns,
the "BANK") are parties to a 364-Day Revolving Credit Agreement and a 3-Year
Reducing Revolving Credit Agreement, each dated as of the date hereof
(collectively, as modified and supplemented and in effect from time to time, the
"CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for
loans to be made by the Bank to the Company in an aggregate principal amount not
exceeding $20,000,000. The Company is party to the several Note Purchase
Agreements dated as of the date hereof (collectively, as modified and
supplemented and in effect from time to time, the "NOTE PURCHASE AGREEMENT")
with the institutional investors named therein (the "PURCHASERS") pursuant to
which the Company has issued its 6.99% Senior Secured Notes dues 2009 in the
aggregate principal amount of $45,000,000 (the "NOTES").
To induce the Bank to enter into the Credit Agreement and to extend
credit thereunder, the Purchasers to purchase the Notes and the LC Provider to
amend the LC Facility and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company has agreed to
pledge and grant a security interest in the Collateral (as hereinafter defined)
as security for the Secured Obligations (as so defined). Accordingly, the
parties hereto agree as follows:
Section 1. DEFINITIONS. Unless the context otherwise requires, any
reference in this Agreement to the Assigned Agreement shall mean such Assigned
Agreement and all schedules, exhibits and attachments thereto as amended,
supplemented or modified and in effect from time to time. Unless otherwise
stated, any reference in this Agreement to any Person shall include its
permitted successors and assigns. In addition, as used herein the following
terms shall have the following respective meanings (all terms defined in this
Section 1 and in the other provisions of this Agreement in the singular to have
the same meanings when used in the plural and VICE VERSA):
<PAGE>
-2-
"ASSIGNED AGREEMENT" shall have the meaning assigned to such term in
Section 3(e) hereof.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"COLLATERAL AGENCY AGREEMENT" shall mean the Collateral Agency
Agreement dated as of the date hereof among the Collateral Agent, the LC
Provider, the Bank and the Purchasers.
"DEFAULT" shall mean a "Default", or an event or condition the
occurrence or existence of which would, with the lapse of time or the
giving of notice or both, become an "Event of Default" under the Note
Purchase Agreement, the Credit Agreement or the LC Facility.
"EVENT OF DEFAULT shall mean an "Event of Default" under the Note
Purchase Agreement, the Credit Agreement or the LC Facility.
"ISSUERS" shall mean, collectively, the respective corporations
identified on Annex 1 hereto under the caption "ISSUER".
"NOTE HOLDERS" shall mean the holders from time to time of the Notes.
"PLEDGED STOCK" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"PERMITTED INVESTMENTS" shall mean
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from a nationally recognized rating
agency;
<PAGE>
-3-
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above; and
(e) investments in a money market fund registered under the
Investment Company Act of 1940 (15 U.S.C. Section 809-1 et seq.), as from
time to time amended, the portfolio of which is limited to United States
government obligations and United States agency obligations.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Bank to, and the promissory note(s)
held by the Bank of, the Company and all other amounts from time to time
owing to the Bank by the Company under the Credit Agreement, (b) the
principal of and Make-Whole Amount (as defined in the Note Purchase
Agreement), if any, and interest on the Notes and all other amounts owed
thereunder or under the Note Purchase Agreement to the Note Holders, (c)
the Reimbursement Obligations and all other amounts owed by the Company to
the LC Provider under the LC Facility and (d) all obligations of the
Company to the Bank, the Note Holders, the LC Provider and the Collateral
Agent hereunder.
"SECURED PARTIES" shall mean the Bank, the Note Holders and the LC
Provider so long as there shall be Secured Obligations owed to such person.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of Connecticut.
Section 2. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Bank, the Purchaser, the LC Provider and the Collateral
Agent that:
(a) The Company is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon the Collateral at any time (and no right or
option to acquire the same exists in favor of any other Person), except for
the pledge and security
<PAGE>
-4-
interest in favor of the Collateral Agent for the benefit of the Secured
Parties created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and
to all of the Collateral.
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the respective Issuer of
such Pledged Stock, upon the transfer of such Pledged Stock.
(c) The Pledged Stock represented by the certificates identified
in Annex 1 hereto constitutes all of the issued and outstanding shares
of capital stock of any class of the Issuers legally and beneficially
owned by the Company on the date hereof (whether or not registered in
the name of the Company) and said Annex 1 correctly identifies, as at
the date hereof, the respective Issuers of such Pledged Stock, the
respective class and par value of the shares comprising such Pledged
Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.
(d) The chief place of business and chief executive office of the
Company and the office where the Company keeps its records concerning the
Collateral and the original copy of the Assigned Agreement is located at
the address specified for the Company on the signature pages hereof. A
certified copy of the Assigned Agreement in effect on the date hereof has
been furnished to the Bank, the Purchaser, the LC Provider and the
Collateral Agent.
Section 3. COLLATERAL. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, the Company hereby pledges, assigns and grants to the
Collateral Agent, for the benefit of the Secured Parties as hereinafter
provided, a security interest in all of the Company's right, title and interest
in the following, whether now owned by the Company or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "COLLATERAL"):
(a) the shares of common stock of the Issuers represented by the
certificates identified in Annex 1 hereto and all other shares of capital
stock of whatever class of the Issuers, now or hereafter owned by the
Company, in each case together with the
<PAGE>
-5-
certificates evidencing the same (collectively, the "PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
the Note Purchase Agreement or the LC Facility, in the event of any
consolidation or merger in which an Issuer is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Company itself)
formed by or resulting from such consolidation or merger;
(d) the balance from time to time in the Collateral Account;
(e) the Forward Equity Purchase Agreements dated as of the date
hereof between CTG Resources, Inc., a Connecticut corporation, and the
Company, as such agreement, may be amended, supplemented or modified and in
effect from time to time (said agreement, as so amended, supplemented or
modified and in effect from time to time, the "ASSIGNED AGREEMENT")
including, without limitation: (i) all rights of the Company to receive
moneys due and to become due under or pursuant to the Assigned Agreement,
(ii) all claims of the Company for damages arising out of or for breach of
or default under the Assigned Agreement and (iii) all rights of the Company
to terminate, amend, supplement, modify or waive performance under the
Assigned Agreement, and to compel performance and otherwise to exercise all
remedies thereunder; and
(f) all proceeds of and to any of the property of the Company
described in the preceding clauses of this Section 3 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by the Company in respect of any of the items listed above).
<PAGE>
-6-
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There is hereby established with the
Collateral Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the
name and under the control of the Collateral Agent into which there shall be
deposited from time to time the cash proceeds of any of the Collateral required
to be delivered to the Collateral Agent pursuant hereto and into which the
Company may from time to time deposit any additional amounts that it wishes to
pledge to the Collateral Agent for the benefit of the Secured Parties as
additional collateral security hereunder. The balance from time to time in the
Collateral Account shall constitute part of the Collateral hereunder and shall
not constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Collateral
Agent shall remit the collected balance outstanding to the credit of the
Collateral Account upon the order of the Company as the Company shall from time
to time instruct; and, unless the Collateral Agent shall have received notice of
an Event of Default from any Secured Party, such balance shall be transmitted to
the Company on the same day as received by wire transfer to an account
designated by the Company. However, at any time following the occurrence and
during the continuance of an Event of Default, the Collateral Agent, if so
instructed by the Secured Parties in accordance with the Collateral Agency
Agreement, shall apply or cause to be applied (subject to collection) the
balance from time to time outstanding to the credit of the Collateral Account to
the payment of the Secured Obligations in the manner specified in Section 4 of
the Collateral Agency Agreement. The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein. In
addition to the foregoing, the Company agrees that if the proceeds of any
Collateral hereunder shall be received by it, the Company shall as promptly as
possible deposit such proceeds into the Collateral Account. Until so deposited,
all such proceeds shall be held in trust by the Company for and as the property
of the Collateral Agent and shall not be commingled with any other funds or
property of the Company.
4.02 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Company (or, after the occurrence and during the continuance
of an Event of Default, the Collateral Agent as directed by the Secured Parties)
shall determine, which Permitted Investments shall be held in the name and be
under the control of the Collateral Agent, PROVIDED that (i) at any time after
the occurrence and during the continuance of an Event of Default, the Collateral
Agent, if so instructed by the Secured Parties in accordance with the Collateral
Agency Agreement, shall liquidate any such Permitted Investments and apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the
<PAGE>
-7-
manner specified in Section 4 of the Collateral Agency Agreement.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Secured Party and the Collateral Agent as follows:
5.01 DELIVERY AND OTHER PERFECTION. The Company shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by the Company under clauses (a), (b) and (c) of Section 3
hereof are received by the Company, forthwith either (x) transfer and
deliver to the Collateral Agent such shares or securities so received by
the Company (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank), all of which thereafter shall be held by the
Collateral Agent, pursuant to the terms of this Agreement, as part of the
Collateral or (y) take such other action as the Collateral Agent shall deem
necessary or appropriate to duly record the lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of any Secured Party) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Collateral Agent to exercise and enforce its rights
hereunder with respect to such pledge and security interest, including,
without limitation, causing any or all of the Collateral to be transferred
of record into the name of the Collateral Agent or its nominee (and the
Collateral Agent agrees that if any Collateral is transferred into its name
or the name of its nominee, the Collateral Agent will thereafter promptly
give to the Company copies of any notices and communications received by it
with respect to the Collateral);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably require in order to reflect
the security interests granted by this Agreement; and
(d) permit representatives of the Collateral Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Collateral Agent to be present at the
Company's place of business to receive copies of all
<PAGE>
-8-
communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by the Company with
respect to the Collateral, all in such manner as the Collateral Agent may
require.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Without the prior written
consent of the Collateral Agent (granted with the authorization of the Secured
Parties in accordance with the Collateral Agency Agreement), the Company shall
not file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Collateral Agent is not named as the sole
secured party for the benefit of the Secured Parties.
5.03 PRESERVATION OF RIGHTS. The Collateral Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
5.04 COLLATERAL.
(1) The Company will cause the Collateral to include at all times
100% of the total number of shares of each class of capital stock of each Issuer
then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to that portion Collateral consisting
of shares of stock for all purposes not inconsistent with the terms of this
Agreement, the Collateral Agency Agreement, the Credit Agreement, the Note
Purchase Agreement or the LC Facility PROVIDED that the Company agrees that it
will not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement, the Collateral Agency Agreement, the Credit Agreement, the
Note Purchase Agreement or the LC Facility; and the Collateral Agent shall
execute and deliver to the Company or cause to be executed and delivered to the
Company all such proxies, powers of attorney, dividend and other orders, and all
such instruments, without recourse, as the Company may reasonably request for
the purpose of enabling the Company to exercise the rights and powers that it is
entitled to exercise pursuant to this Section 5.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Collateral Agent acting
in accordance with the Collateral Agency Agreement or any Secured Party
exercises any available right to declare
<PAGE>
-9-
any Secured Obligation due and payable or seeks or pursues any other relief or
remedy available to it under applicable law or under this Agreement, the Credit
Agreement, the Note Purchase Agreement, the Notes, the LC Facility or any other
agreement relating to such Secured Obligation, all dividends and other
distributions and payments on the Collateral shall be paid directly to the
Collateral Agent and retained by it in the Collateral Account as part of the
Collateral, subject to the terms of this Agreement, and, if the Collateral Agent
shall so request in writing, the Company agrees to execute and deliver to the
Collateral Agent appropriate additional dividend, distribution and other orders
and documents to that end, PROVIDED that if the Collateral Agent shall have been
advised by the Secured Parties that such Event of Default has been cured, any
such dividend, distribution or payment theretofore paid to the Collateral Agent
shall, upon request of the Company (except to the extent theretofore applied to
the Secured Obligations), be returned by the Collateral Agent to the Company.
5.05 SPECIAL PROVISIONS RELATING TO THE ASSIGNED AGREEMENT.
(a) Anything herein to the contrary notwithstanding, the Company
shall remain liable to perform all of its duties and obligations under the
Assigned Agreement to the same extent as if this Agreement had not been
executed. The exercise by the Collateral Agent or any other Secured Party of
any of the rights and remedies hereunder shall not release the Company from any
of its duties or obligations under the Assigned Agreement or in respect of the
Collateral. Neither the Collateral Agent nor any of the other Secured Parties
shall have any obligation or liability under the Assigned Agreement or otherwise
in respect of the Collateral by reason of this Agreement or be obligated to
perform any of the obligations or duties of the Company under the Assigned
Agreement or otherwise in respect of the Collateral or to take any action to
collect or enforce any claim for payment or any other right assigned hereunder.
(b) If the Company fails to perform any agreement contained herein or
in the Assigned Agreement, the Collateral Agent may itself, but shall have no
obligation to, perform, or cause the performance of, such agreement, and the
reasonable expenses of the Collateral Agent incurred in connection therewith
shall be payable by the Company and shall be Secured Obligations to the
Collateral Agent secured under Section 3 hereof.
5.06 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Collateral Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are
<PAGE>
-10-
asserted) and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as if
the Collateral Agent were the sole and absolute owner thereof (and the
Company agrees to take all such action as may be appropriate to give effect
to such right);
(b) the Collateral Agent in its discretion may, in its name or in the
name of the Company or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do
so; and
(c) the Collateral Agent may, upon ten business days' prior written
notice to the Company of the time and place, with respect to the Collateral
or any part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Collateral Agent, the Bank, the Note
Holders, the LC Provider or any of their respective agents, sell, lease,
assign or otherwise dispose of all or any part of such Collateral, at such
place or places as the Collateral Agent deems best, and for cash or for
credit or for future delivery (without thereby assuming any credit risk),
at public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof
(except such notice as is required above or by applicable statute and
cannot be waived), and the Collateral Agent, the Bank, any Note Holder or
the LC Provider or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public sale
(or, to the extent permitted by law, at any private sale) and thereafter
hold the same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise), of
the Company, any such demand, notice and right or equity being hereby
expressly waived and released. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale
may be so adjourned.
The proceeds of each collection, sale or other disposition under this
Section 5.06 shall be applied in accordance with Section 4 of the Collateral
Agency Agreement.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral
<PAGE>
-11-
Agent may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. The Company acknowledges that any such
private sales may be at prices and on terms less favorable to the Collateral
Agent than those obtainable through a public sale without such restrictions,
and, notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner and that the
Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the respective Issuer or issuer thereof to register it for public
sale.
5.07 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.06 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
5.08 REMOVALS, ETC. Without at least 30 days' prior written notice
to the Collateral Agent, the Company shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place other than at the address indicated beneath the
signature of the Company on the signature pages hereto or (ii) change its name,
or the name under which it does business, from the name shown on the signature
pages hereto.
5.09 PRIVATE SALE. The Collateral Agent, the Note Holders, the Bank
and the LC Provider shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale pursuant to Section 5.06
hereof conducted in a commercially reasonable manner. The Company hereby waives
any claims against the Collateral Agent, the Bank, any Note Holder or the LC
Provider arising by reason of the fact that the price at which the Collateral
may have been sold at such a private sale was less than the price that might
have been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.
5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Collateral Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Collateral Agent is hereby appointed the attorney-in-fact of the
Company for the purpose of carrying out the provisions of this Section 5 and
taking any action and executing any instruments that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which
<PAGE>
-12-
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, so long as the Collateral
Agent shall be entitled under this Section 5 to make collections in respect of
the Collateral, the Collateral Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of the Company
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall deliver to the Collateral Agent
all certificates identified in Annex 1 hereto, accompanied by undated stock
powers duly executed in blank.
5.12 TERMINATION. When all Secured Obligations shall have been paid
in full and the obligations of the Bank under the Credit Agreement and of the LC
Provider under the LC Facility shall have expired or been terminated, this
Agreement shall terminate, and the Collateral Agent, upon being so directed by
the Secured Parties, shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the Company.
5.13 FURTHER ASSURANCES. The Company agrees that, from time to time
upon the written request of the Collateral Agent, the Company will execute and
deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order fully to effect the purposes of
this Agreement.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Collateral Agent, the
Bank, any Note Holder or the LC Provider to exercise, and no course of dealing
with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent, the Bank, any Note Holder or the LC Provider
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
herein are cumulative and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the intended recipient at its
specified address pursuant to Section 8.07 of the Credit Agreement (in the case
of the Bank), Section 18 of the Note Purchase Agreement (in the case of Note
Holder), Section 8.5 of the LC Facility (in the case of the LC Provider),
Section 8.1 of the Collateral Agency Agreement (in the case of the
<PAGE>
-13-
Collateral Agent) and the signature pages hereof (in the case of the Company).
6.03 EXPENSES. The Company agrees to reimburse each of the Secured
Parties for all reasonable costs and expenses of the Secured Parties (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default or Event of Default and any enforcement or
collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (w) performance by the
Collateral Agent of any obligations of the Company in respect of the Collateral
that the Company has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Collateral Agent
in respect thereof, by litigation or otherwise, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 6.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Collateral Agent (acting on the authorization of the Secured Parties in
accordance with the Collateral Agency Agreement). Any such amendment or waiver
shall be binding upon the Collateral Agent and the Bank, each Note Holder, the
LC Provider, each holder of any of the Secured Obligations and the Company.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Bank, the Note Holders, the LC Provider and
each holder of any of the Secured Obligations (PROVIDED, however, that the
Company shall not assign or transfer its rights hereunder without the prior
written consent of the Collateral Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
<PAGE>
-14-
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of Connecticut.
6.09 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Collateral Agent,
the Bank, the Note Holders and the LC Provider in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
<PAGE>
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Assignment Agreement to be duly executed and delivered as of the day and year
first above written.
THE ENERGY NETWORK, INC.
By _________________________
Title:
Address:
100 Columbus Blvd.
Hartford, Connecticut 06144
Attention:
Telecopy No.:
STATE STREET BANK AND TRUST
COMPANY
as Collateral Agent
By _________________________
Title:
<PAGE>
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c)]
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
[Issuer #1] _______ ________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #2] _______ ________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #3] _______ ________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[To be prepared by the Company]
<PAGE>
10/1/97
EXHIBIT E
BII/88700_3
[FORM OF SUBSIDIARY GUARANTEE]
================================================================================
[NAME OF SUBSIDIARY GUARANTOR]
_______________
GUARANTEE
Dated ________________
_______________
================================================================================
<PAGE>
GUARANTEE
GUARANTEE dated as of [_____________] by [NAME OF SUBSIDIARY
GUARANTOR] (the "SUBSIDIARY GUARANTOR"), a corporation organized under the laws
of [___________], in favor of each person who is from time to time a holder
(each, a "HOLDER" and, collectively, the "HOLDERS") of one or more of the 6.99%
Senior Secured Notes due 2009 issued in an original aggregate principal amount
of $45,000,000 (together with all notes delivered in substitution or exchange
for any of said notes pursuant to the Note Agreement referred to below, the
"NOTES") issued by The Energy Network, Inc., a Connecticut Corporation (the
"COMPANY"), pursuant to the several Note Purchase Agreements dated as of October
1, 1997 (collectively, as amended, modified or supplemented from time to time,
the "NOTE AGREEMENT") among the Company and the Holders whose names appear in
Schedule A thereto. All capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed thereto in the Note Agreement.
Section 1. GUARANTEE, ETC.
Section 1.1. GUARANTEE. For valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Subsidiary Guarantor hereby
unconditionally, absolutely and irrevocably guarantees the full and punctual
payment to the Holders, as and when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, of all of the
principal of and Make-Whole Amount (if any) and interest on the Notes
(including, without limitation, interest on any overdue principal, Make-Whole
Amount and, to the extent permitted by applicable law, on any overdue interest)
and all other amounts from time to time owing by the Company under the Note
Agreement and under the Notes (including, without limitation, costs, expenses
and taxes) (collectively, the "GUARANTEED OBLIGATIONS"), in the same currency as
the currency of the Guaranteed Obligations and strictly in accordance with the
terms of the Notes and the Note Agreement.
Section 1.2. NATURE OF GUARANTEE. The guarantee provided for under
this Section 1 shall in all respects be a continuing, absolute, unconditional
and irrevocable guarantee of payment when due and not of collection, and shall
remain in full force and effect until all applicable Guaranteed Obligations have
expired and been fully and indefeasibly paid and all obligations of the
Subsidiary Guarantor hereunder have been fully and indefeasibly paid. The
Subsidiary Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms thereof, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of any Holder with respect thereto. The Subsidiary
Guarantor renounces all benefits of discussion and division. The liability of
the Subsidiary Guarantor hereunder shall be absolute, unconditional and
irrevocable irrespective of, and without being lessened or limited by:
(a) the occurrence of any Event of Default under, or any lack of validity,
legality or enforceability of any provision of the Note Agreement, the
Notes or any other agreement;
<PAGE>
-2-
(b) the failure of any Holder,
(i) to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person (including any other
guarantor of the Guaranteed Obligations) under the provisions of
this Guarantee, or otherwise, or
(ii) to exercise any right or remedy against any other guarantor of,
or collateral securing, any of the Guaranteed Obligations;
(c) any change in the time, manner or place of payment of, or in any term
of, all or any of the Guaranteed Obligations, or any other extension,
compromise, indulgence or renewal of any Guaranteed Obligation;
(d) any reduction, limitation, variation, impairment, discontinuance or
termination of the Guaranteed Obligations for any reason (other than
by reason of any payment which is not required to be rescinded),
including any claim of waiver, release, discharge, surrender,
alteration or compromise, and shall not be subject to (and the
Subsidiary Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, the Guaranteed Obligations or otherwise (other than the
reason of any payment which is not required to be rescinded);
(e) any amendment to, rescission, waiver or other modification of, or any
consent to any departure from, any of the terms of the Guaranteed
Obligations or any guarantees or security;
(f) any addition, exchange, release, discharge, realization or
non-perfection of any collateral security in respect of the Guaranteed
Obligations;
(g) any amendment to, rescission, waiver or other modification of, or
release or addition of, or consent to any departure from, any other
guarantee held by the Holders as security for any of the Guaranteed
Obligations;
(h) the loss of or in respect of or the unenforceability of any other
guarantee or other security which the Holders may now or hereafter
hold in respect of the Guaranteed Obligations, whether occasioned by
the fault of the Holders or otherwise;
(i) any change in the name of the Company or in the constating documents,
<PAGE>
-3-
capital structure, capacity or constitution of Company, the bankruptcy
or insolvency of the Company, the sale of any or all of the Company's
business or assets or the Company being consolidated, merged or
amalgamated with any other Person;
(j) any failure on the part of the Company or any other Person to perform
or comply with any term of the Note Agreement, the Notes any of the
Guaranteed Obligations or any other agreement;
(k) any suit or other action brought by any beneficiaries or creditors of,
or by, the Company or any other Person for any reason whatsoever,
including without limitation any suit or action in any way attacking
or involving any issue, matter or thing in respect of the Note
Agreement, the Notes, any of the Guaranteed Obligations or any other
agreement;
(l) any lack or limitation of status or of power, incapacity or disability
of the Company or any trustee or agent thereof; or
(m) any other circumstance (other than final and indefeasible payment in
full) which might otherwise constitute a defense available to, or a
legal or equitable discharge of, the Company, any surety or any other
guarantor.
Any Guaranteed Obligation which may not be recoverable from the Subsidiary
Guarantor as guarantor shall be recoverable from the Subsidiary Guarantor as
principal debtor in respect thereof.
Section 1.3. HOLDERS NOT BOUND TO EXHAUST RECOURSE. No Holder shall
be bound to exhaust its recourse against the Company or others or any security
or other guarantees it may at any time hold before being entitled to payment
hereunder from the Subsidiary Guarantor.
Section 1.4. DEMAND. The liability of the Subsidiary Guarantor to
make payment under this Guarantee to the Holders shall arise forthwith after
demand for payment has been made in writing to the Subsidiary Guarantor by any
Holder (to the address for the Subsidiary Guarantor set forth on the signature
pages hereof).
Section 1.5. GUARANTEE IN ADDITION TO OTHER SECURITY. The guarantee
provided for in this Guarantee shall be in addition to and not in substitution
for any other guarantee or other security that the Holders may now or hereafter
hold in respect of the Guaranteed Obligations, and the Holders or any of them
shall be under no obligation to marshal in favor of the Subsidiary Guarantor any
other guarantee or other security or any moneys or other assets that any of them
may be entitled to receive or may have a claim
<PAGE>
-4-
upon.
Section 1.6. REINSTATEMENT. The guarantee provided for in this
Guarantee and all other terms of this Guarantee shall continue to be effective
or shall be reinstated, as the case may be, if at any time any payment by the
Company or the Subsidiary Guarantor of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the recipients thereof by reason of
the insolvency, bankruptcy or reorganization of the Company or the Subsidiary
Guarantor or for any other reason, all as though such payment had not been made.
Section 1.7. WAIVER OF NOTICE, ETC. Subject to and except for demand
pursuant to Section 1.4, the Subsidiary Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guarantee.
Section 1.8. SUBROGATION RIGHTS. Until satisfaction in full of all
of the Guaranteed Obligations, all dividends, compositions, proceeds of security
or payments received by any Holder in respect of the Guaranteed Obligations
shall be regarded for all purposes as payments in gross without any right on the
part of the Subsidiary Guarantor to claim the benefit thereof in reduction of
the liability under this Guarantee. The Subsidiary Guarantor shall not exercise
any rights which it may acquire by way of subrogation under this Guarantee, by
any payment made hereunder or otherwise, until the prior satisfaction in full of
all of the Guaranteed Obligations. Any amount paid to the Subsidiary Guarantor
on account of any such subrogation rights prior to the satisfaction in full of
all Guaranteed Obligations shall be held in trust for the benefit of the Holders
and shall immediately be paid to the Holders, and credited and applied against
the applicable Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms hereof; PROVIDED, however, that upon the full and
indefeasible payment of all of the Guaranteed Obligations, the Subsidiary
Guarantor shall be subrogated to the rights of the Holders against the Company
with respect to all Guaranteed Obligations. In furtherance of the foregoing,
upon notice to the Subsidiary Guarantor from any Holder of the occurrence of an
Event of Default and until such time as the earliest of,
(a) such Event of Default being remedied or cured as provided in the Note
Agreement;
(b) such Event of Default being waived in accordance with the terms of the
Note Agreement; and
(c) all Guaranteed Obligations being indefeasibly paid in full;
the Subsidiary Guarantor shall postpone any and all claims it may have against
the Company
<PAGE>
-5-
to the claims of the Holders against the Company and shall refrain from taking
any action or commencing any proceeding against the Company (or its successors
or assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in respect of payments made hereunder to the Holders or any
of them. In the event any payments are made by the Company to the Subsidiary
Guarantor in contravention of the preceding sentence, the Subsidiary Guarantor
shall hold such payments in trust for the Holders and shall forthwith pay such
payments to the Holders.
Section 1.9. CREDIT INFORMATION. The Holders have no duty or
responsibility to provide the Subsidiary Guarantor with any credit or other
information concerning the Company's affairs, financial condition or business
which may come into the possession of any Holder.
Section 2. REPRESENTATIONS. The Subsidiary Guarantor represents and
warrants as follows:
Section 2.1. ORGANIZATION; POWER AND AUTHORITY. The Subsidiary
Guarantor is a corporation duly organized, validly existing and, if applicable,
in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and, if applicable, is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Subsidiary Guarantor has the corporate
power and authority to execute and deliver this Guarantee and to perform the
provisions hereof.
Section 2.2. AUTHORIZATION, ETC. This Guarantee has been duly
authorized by all necessary corporate action on the part of the Subsidiary
Guarantor, and this Guarantee constitutes a legal, valid and binding obligation
of the Subsidiary Guarantor enforceable against the Subsidiary Guarantor in
accordance with its terms, except as the enforceability thereof may be limited
by (I) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (II) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 2.3. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS OF THE
SUBSIDIARY GUARANTOR, ETC. The execution, delivery and performance by the
Subsidiary Guarantor of this Guarantee will not (I) contravene, result in any
breach of, constitute a default under, or result in the creation of any Lien in
respect of any property of the Subsidiary Guarantor under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Subsidiary
Guarantor is bound or by which the Subsidiary Guarantor or any of its properties
may be bound or affected, (II) conflict with or result in a breach of any of the
terms, conditions or
<PAGE>
-6-
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Subsidiary Guarantor or (III) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Subsidiary Guarantor.
Section 2.4. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval
or authorization of, or registration, filing, or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by the Subsidiary Guarantor of this Guarantee.
Section 2.5. RANKING. All obligations and liabilities of the
Subsidiary Guarantor under this Guarantee constitute direct, unsecured,
unconditional and general obligations of the Subsidiary Guarantor and rank in
right of payment either PARI PASSU or senior to all other Indebtedness of the
Subsidiary Guarantor (it being understood that Indebtedness that is secured may
be effectively senior to the extent of such security).
Section 3. MISCELLANEOUS.
Section 3.1. SUCCESSORS AND ASSIGNS. All agreements contained in
this Guarantee bind the Subsidiary Guarantor and inure to the benefit of the
Holders and in each case to their respective successors and assigns (including,
without limitation, any subsequent Holder of a Note) whether so expressed or
not.
Section 3.2. SEVERABILITY. Any provision of this Guarantee that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 3.3. CONSTRUCTION. Each agreement contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other agreement contained herein, so that compliance with any one agreement
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other agreement. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
<PAGE>
-7-
Section 3.4. GOVERNING LAW. This Guarantee shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of Connecticut.
Section 3.5. EXPENSES. The Subsidiary Guarantor shall indemnify each
Holder on demand in respect of all costs and expenses (including reasonable
legal fees) incurred by it in connection with the enforcement of this Guarantee
or the preservation of the rights of such Holder as a result of any breach by
the Subsidiary Guarantor of its obligations hereunder.
Section 3.6. NOTICES. All notices and communications provided for
hereunder shall be in writing and sent as provided in Section 18 of the Note
Agreement (i) if to any Holder, to the address specified for such Holder in the
Note Agreement and (ii) if to the Subsidiary Guarantor, to the address for the
Subsidiary Guarantor set forth on the signature pages hereof.
Section 3.7. AMENDMENTS. This Guarantee may be amended, and
observance of any term hereof waived (either retroactively or prospectively),
with (and only with) the written consent of the Subsidiary Guarantor and the
Required Holders.
Section 3.8. RELEASE. If at any time the Subsidiary Guarantor shall
cease to be a CTG Subsidiary (as a result of a transaction contemplated by
Section 9.5 of the Note Purchase Agreement or otherwise) and shall cease to
guarantee any other Indebtedness of the Company, CTG or any other CTG
Subsidiary, upon written notice thereof to the Holders, the Subsidiary Guarantor
shall be released from all of its obligations hereunder arising after such time.
<PAGE>
-8-
EXECUTED by the Subsidiary Guarantor as of the day and year first
above written.
[SUBSIDIARY GUARANTOR]
By______________________
Title:
Address of Subsidiary Guarantor:
<PAGE>
FORWARD EQUITY PURCHASE AGREEMENT
This FORWARD EQUITY PURCHASE AGREEMENT, made as of October 1, 1997
(this "Agreement"), is between CTG RESOURCES INC., a Connecticut corporation
("CTG"), and THE ENERGY NETWORK, INC., a Connecticut corporation ("TEN").
WITNESSETH:
----------
WHEREAS, CTG owns all of the capital stock of TEN; and
WHEREAS, TEN has requested that CTG provide TEN with additional
equity capital to enable TEN to carry on its business and CTG is willing to
purchase additional shares of capital stock of TEN; and
WHEREAS, TEN has agreed to purchase or otherwise acquire from time
to time shares of common stock, without par value, of CTG ("CTG Common
Stock");
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Purchase of TEN Capital Stock. CTG, for value received and in
consideration of TEN's agreement to transfer to CTG any and all shares of CTG
Common Stock acquired by TEN, promises to purchase on the first day of each
January, April, July and October in each of the calendar years 1998 through
and including 2009 $1,875,000 of capital stock of TEN. The aggregate amount
of capital stock of TEN to be purchased is $90,000,000.
2. Acquisition of CTG Common Stock. TEN, for value received and in
consideration of CTG's agreement to purchase additional capital stock of TEN,
agrees to purchase or otherwise acquire not less than 1,800,000 shares of CTG
Common Stock, such purchase or acquisition to be by open market purchase,
tender offer and/or otherwise (other than a purchase or acquisition directly
from CTG or its affiliates). TEN shall promptly transfer or cause to be
transferred any shares of CTG Common Stock so purchased or otherwise acquired
to CTG.
3. No Waiver; Remedies Cumulative. No failure or delay on the part of
TEN in exercising any right, power or privilege hereunder and no course of
dealing between TEN and CTG shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights herein expressly provided are
cumulative and not exclusive of any rights or remedies that TEN would
otherwise have. No notice to or demand on CTG in any case shall entitle CTG
to any other or further
<PAGE>
notice or demand in similar or other circumstances or constitute a waiver of
the rights of TEN to any other or further action in any circumstances without
notice or demand.
4. Limitation on Dividends. CTG will not, directly or indirectly,
declare or pay any dividend, or make any distribution, in respect of CTG
Common Stock or to the holders of CTG Common Stock unless any and all amounts
then due and payable under this Agreement have been paid in full.
5. Assignment. Except as otherwise agreed by the parties hereto, this
Agreement is not assignable by either such party.
6. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Connecticut.
[The remainder of this page is intentionally left blank.]
2
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed, or have cause
their duly authorized officer or representative to execute, this Agreement to
be executed as of the date first written above.
CTG RESOURCES, INC.
By: /s/
---------------------------
Its:____________________________
THE ENERGY NETWORK, INC.
By: /s/
----------------------------
Its:____________________________
3
